Incentives for Municipalities to Divert Waste

Waste Research Development and

Innovation Roadmap Research Report

Final Report

NAHMAN, A.

31 MARCH 2021

Incentives for Municipalities to Divert Waste

from Landfill in South Africa

Incentives for Municipalities to Divert Waste from

Landfill in South Africa: Final Report

Prepared for

Department of Science and Technology

Directorate Environmental Services

and Technologies

Private Bag X894, Pretoria,

South Africa, 0001

Council for Scientific and Industrial Research

Waste RDI Roadmap Implementation Unit

PO Box 395, Pretoria,

South Africa, 0001

Prepared by

CSIR: Smart Places

PO Box 395, Pretoria,

South Africa, 0001

Authors

Nahman, A.

CSIR External Report # CSIR/SPLA/SECO/ER/2021/0013/A

March 2021

Any statements, findings, and conclusions or recommendations expressed in this research report are those of the authors and do not

necessarily reflect the views of the Department of Science and Technology or the

Council for Scientific and Industrial Research

Incentives for Municipalities to Divert Waste from Landfill in South Africa

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EXECUTIVE SUMMARY

INTRODUCTION

The National Environmental Management: Waste Act, 2008 (No. 59 of 2008) (Republic of South

Africa, 2008) and National Waste Management Strategy (NWMS) (Department of Environmental

Affairs, 2011) call for increased diversion of waste away from landfill towards reuse, recycling and

recovery. This is in line with the waste management hierarchy, according to which waste should first

be avoided, reduced, reused, recycled or recovered (in order of preference); with disposal as a last

resort. It is also in line with the concept of a circular economy, which is central to the updated NWMS

(Department of Environment, Forestry and Fisheries, 2021).

However, the majority of waste generated in South Africa is still disposed of (either to landfill or a

communal/own dumpsite, or illegally dumped) (Department of Environmental Affairs, 2018a).

The aim of this study was to understand the root causes for the dominance of landfilling as a waste

management option in South Africa, and to identify relevant solutions for addressing the issues and

for increasing the diversion of waste from landfill toward alternative waste management options.

The focus was on identifying economic instruments that can be implemented by national

government to create incentives for the diversion of waste from landfill. In this respect, a guideline

was developed for national government, providing guidance for the selection, design and

implementation of such instruments.

In addition, the project also looked more broadly at the range of actions required by all relevant

role-players in order to move up the waste hierarchy in South Africa.

METHODOLOGY

The project consisted of four phases, as follows:

1. Scoping: Literature reviews and workshops with stakeholders and experts to unpack the

root causes for the predominance of landfilling as a waste management option in SA.

2. Review: Literature review and discussions with stakeholders and experts to identify

relevant economic, regulatory and other instruments that can potentially address the root

causes and increase the diversion of waste away from landfill toward alternative waste

management options. Lessons learned from the implementation of these instruments in

other countries were documented, as were considerations for their potential

implementation in South Africa.

3. Assessment: Evaluation of the identified instruments in terms of their suitability for

addressing the root causes and incentivising the diversion of waste from landfill toward

alternative waste management options.

4. Reporting: Development of a guideline for national government to inform the

implementation of economic instruments to incentivise the diversion of waste away from

landfill; as well as related project deliverables.


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ROOT CAUSES: WHY ARE WE NOT MOVING UP THE WASTE MANAGEMENT HIERARCHY?

A wide range of root causes for the dominance of landfilling as a waste management option in South

Africa were identified. These can be categorized as follows:

1. Legislative barriers

2. Low cost of landfilling

3. High cost of alternative waste management options

4. Lack of funding and other resources

5. (Perceived) lack of benefits from alternative waste management options

6. Behavioural and institutional issues

ADDRESSING THE ROOT CAUSES: LEVERS FOR CHANGE

A broad range of potential solutions were identified for addressing the various issues and increasing

the diversion of waste from landfill in South Africa toward alternative waste management options.

Given the complex nature of the problem, and the broad range of issues to be addressed, no single

type of intervention on its own is likely to be effective; nor will actions by any one role-player be

effective in isolation. Instead, implementing the waste hierarchy and transitioning to a circular

economy will require a coherent set of mutually reinforcing regulatory, economic and other

interventions; with actions required by all relevant role-players.

THE ROLE OF ECONOMIC INSTRUMENTS: GUIDELINES FOR NATIONAL GOVERNMENT

During the project, a guideline was developed for national government that focuses specifically on

addressing the economic/financial issues identified above, particularly through the implementation

of economic instruments and incentives. Specifically, the focus is on economic instruments that can

be implemented by national government to create incentives for waste to be diverted from landfill

toward alternative waste management options, such as recycling and recovery. The guideline aims

to provide practical guidance for the selection, design and implementation of such instruments.

It should be noted that the guideline focuses specifically on ‘downstream’ economic instruments

for diverting waste away from landfill; and not on the upstream measures required to reduce waste

generation. Specifically, the guideline focuses on the following categories of economic instruments:

Conditional grant funding for waste infrastructure (through a dedicated fund for waste

infrastructure, with conditions attached to funding)

Landfill tax

Subsidies/tax concessions (e.g. tax credits for investing in infrastructure for alternative

waste treatment, subsidies per unit or per kg of material processed through alternative

treatment, tax credits/rebates for using recycled materials, income guarantees/price

support to recyclers, ‘top up’ incentives for collectors)

Virgin material taxes (and elimination of perverse subsidies).


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However, in line with the waste hierarchy, it is clear that there is also a need to look at the upstream

measures required to achieve waste avoidance and reduction in the first place, rather than solely

relying on ‘end-of-pipe’ solutions to deal with waste once it has already been generated.

KEY FINDINGS

An important finding of the study is that environmental taxes and other economic instruments are

only justified where there is a specific market failure (e.g. an environmental externality) to be

addressed. Markets and related institutions that are otherwise well-functioning, as well as the

requisite institutional capacity and political will, are important prerequisites.

Landfill taxes, for example, are not appropriate when there are underlying structural issues; e.g.

pervasive under-pricing of waste services due to landfill sites being unlicensed or non-compliant,

lack of full-cost accounting, tariffs being set below the levels required for cost-recovery, etc. These

issues need to be corrected before considering a landfill tax, which could create further distortions.

Landfill taxes are only designed to address environmental externalities, and not the various other

root causes behind the low cost of landfilling and under-pricing of waste services. Specific

prerequisites that need to be addressed before landfill taxes can be considered in SA are as follows:

Licensing of landfill sites, and compliance with permit conditions and with the Norms and

Standards for Disposal of Waste to Landfill (Department of Environmental Affairs, 2013)

Viable alternatives to landfill disposal (e.g. options for recycling) to enable a change in

behaviour without stimulating an increase in illegal dumping

Effective access control, functioning weighbridges and adequate reporting systems, to

enable accurate monitoring and reporting of waste quantities

Capacity to monitor and control illegal dumping

Full cost accounting, and cost reflective gate fees and waste tariffs, to enable cost recovery

Municipalities must be in a sufficiently sound financial position for payment of the tax.

Importantly, putting in place some of these prerequisites will in and of itself increase the cost of

landfilling (and thereby result in a diversion of waste from landfill); even without the imposition of

a landfill tax. Therefore, once these fundamentals have been addressed, it could potentially be

found that there is no longer a need for such a tax. In this way, the potential negative impacts of a

landfill tax (e.g. stimulating an increase in illegal dumping, negative impacts on municipal finances,

etc.) can be avoided.

In conclusion, while this study focuses on ‘downstream’ economic instruments that can be

implemented by national government to incentivise increased diversion of waste from landfill; there

is clearly a need for a much broader suite of interventions to be implemented, with action required

by role-players at all levels. In particular, there is a need to focus on waste avoidance and reduction,

in line with the waste hierarchy; and in particular to focus on improved product design (e.g. Design

for Recycling, or Design for Environment more broadly); in line with the circular economy. In

addition, with a number of other waste streams currently being addressed through EPR; there is a

need for actions to address organic and C&D waste; which make up the bulk of the waste going to

landfill, and for which significant untapped opportunities exist.


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TABLE OF CONTENTS

1 Introduction .............................................................................................................................. 1

1.1 Problem statement......................................................................................................... 1

1.2 Aims of the study ............................................................................................................ 3

1.3 Structure of this report................................................................................................... 5

2 Research Design and Methodology .......................................................................................... 5

3 Root causes for the dominance of landfilling as a waste management option in South Africa6

3.1 Legislative barriers ......................................................................................................... 7

3.1.1 Municipalities are mandated to collect and dispose ........................................ 7

3.1.2 The NWMS does not allocate and delineate responsibilities ............................ 8

3.1.3 Legislation makes it difficult for the private sector to get involved .................. 8

3.2 Low cost of landfilling ..................................................................................................... 9

3.2.1 Many landfill sites in South Africa are unregulated, unlicensed and/or non-

compliant, and therefore the cost of landfilling is artificially low. .................... 9

3.2.2 Lack of full cost accounting and cost recovery for waste services .................. 10

3.2.3 Externalities are not internalized .................................................................... 11

3.3 High cost of alternative waste management options .................................................. 12

3.4 Lack of funding and other resources ............................................................................ 13

3.4.1 Lack of funding for capital infrastructure ........................................................ 13

3.4.2 Difficult to raise tariffs ..................................................................................... 13

3.4.3 Lack of skills ..................................................................................................... 13

3.4.4 Lack of data ...................................................................................................... 14

3.5 (Perceived) lack of benefits from alternative waste management options ................. 14

3.5.1 Where there is airspace available, there is no incentive to divert waste ....... 14

3.5.2 Failure to properly understand or account for the benefits ........................... 14

3.5.3 Market prices are too low ............................................................................... 14

3.5.4 Fluctuating market price of virgin materials ................................................... 14

3.5.5 Lack of markets ................................................................................................ 15

3.5.6 Virgin materials tend to be cheaper ................................................................ 15

3.6 Behavioural and institutional issues ............................................................................. 15

3.6.1 Lack of an effective enabling environment created by national government 15

3.6.2 Producers don’t take responsibility for their products at end of life .............. 15

3.6.3 It is difficult to change deeply entrenched behavioural patterns among waste

generators ....................................................................................................... 15

3.6.4 Institutional issues within municipalities ........................................................ 16

3.6.5 Lack of collaboration and partnerships ........................................................... 16

4 Literature review: Review of policy instruments for diverting waste from landfill ............... 17

4.1 Introduction .................................................................................................................. 17

4.2 Instruments aimed at discouraging waste to landfill ................................................... 24

4.2.1 Licensing, enforcement, penalties and fees .................................................... 24

4.2.2 Landfill bans ..................................................................................................... 25

4.2.3 Tradable quotas ............................................................................................... 27


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4.2.4 Cost reflective gate fees .................................................................................. 28

4.2.5 Differentiated gate fees................................................................................... 29

4.2.6 Landfill taxes .................................................................................................... 30

4.2.7 Waste Infrastructure Development Fund ....................................................... 35

4.2.8 Education and awareness ................................................................................ 37

4.3 Instruments aimed at making alternatives more viable .............................................. 38

4.3.1 Legislative changes .......................................................................................... 38

4.3.2 Standards ......................................................................................................... 38

4.3.3 Procurement policies ....................................................................................... 39

4.3.4 Elimination of perverse subsidies .................................................................... 39

4.3.5 Virgin material taxes ........................................................................................ 40

4.3.6 Advance recycling fee ...................................................................................... 40

4.3.7 Deposit-refund schemes.................................................................................. 41

4.3.8 Subsidies .......................................................................................................... 45

4.3.9 Tax concessions / rebates ................................................................................ 50

4.3.10 Tradable recycling obligations ......................................................................... 50

4.3.11 Infrastructure Development Funding / Grants ................................................ 51

4.3.12 Partnerships ..................................................................................................... 52

4.3.13 Education and awareness ................................................................................ 52

4.3.14 Extended Producer Responsibility ................................................................... 53

4.3.15 Separation at Source ....................................................................................... 56

4.4 Conclusions from the literature review ........................................................................ 58

4.4.1 Pre-conditions for implementing economic instruments ............................... 58

4.4.2 The need for a suite of complementary policy instruments ........................... 60

4.4.3 Using tax revenues appropriately ................................................................... 63

4.4.4 The need for gradualism .................................................................................. 65

5 Addressing the root causes for the dominance of landfilling: Identifying “Levers for Change”

for increasing the diversion of waste from landfill ................................................................. 66

5.1 Legislative barriers ....................................................................................................... 67

5.2 Low cost of landfilling ................................................................................................... 69

5.3 High cost of alternative waste management options .................................................. 71

5.4 Lack of funding and other resources ............................................................................ 72

5.5 (Perceived) lack of benefits from alternative waste management options ................. 74

5.6 Behavioural and institutional issues ............................................................................. 76

6 Guidelines for implementing economic instruments to incentivise diversion of waste from

landfill ..................................................................................................................................... 80

6.1 Conditional grant funding for waste infrastructure ..................................................... 84

6.1.1 What is it? ........................................................................................................ 84

6.1.2 How to implement it? ...................................................................................... 86

6.2 Landfill tax .................................................................................................................... 88

6.2.1 What is it? ........................................................................................................ 88


6.3 Subsidies, tax concessions and incentives ................................................................... 94

6.3.1 What is it? ........................................................................................................ 94



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6.4 Virgin material taxes (and elimination of perverse subsidies) ................................... 101

6.4.1 What is it? ...................................................................................................... 101

6.4.2 How to implement it? .................................................................................... 102

7 Conclusions ........................................................................................................................... 104

8 References ............................................................................................................................ 106


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1 Introduction

1.1 Problem statement

The National Environmental Management: Waste Act, 2008 (No. 59 of 2008) (Republic of South

Africa, 2008) calls for increased diversion of waste away from landfill towards re-use, recycling and

recovery. Similarly, the National Waste Management Strategy (Department of Environmental

Affairs, 2011; Department of Environment, Forestry and Fisheries, 2021) calls for waste to be

managed according to the waste management hierarchy (see Figure 1). This means that waste

should in the first instance be avoided, reduced, reused, recycled or recovered (in descending order

of preference); with final disposal (e.g. to landfill) as a last resort. Moving up the waste hierarchy is

in line with the concept of a circular economy, which is central to the updated NWMS (Department

of Environment, Forestry and Fisheries, 2021).

Figure 1: The Waste Management Hierarchy (UNEP, 2015). This depiction of the hierarchy emphasises that

disposal to well managed landfills is still preferable to ‘uncontrolled disposal’ (i.e. open dumping).

However, the majority of waste generated in South Africa is still disposed of (either to landfill or a

communal/own dumpsite, or illegally dumped) (Department of Environmental Affairs, 2018a). For

example, according to the final draft State of Waste report (Department of Environmental Affairs,

2018a), 34.5% of general waste generated in 2017 was recycled or recovered, while 65.2% was

disposed to landfill. This represents a significant loss of valuable resources that could potentially be

recovered and recycled for further processing (Department of Science and Technology, 2014).

Disposal of waste also gives rise to negative social and environmental impacts (Nahman, 2011);

while many municipalities are rapidly running out of landfill airspace.



The dominance of landfilling as a waste management option in South Africa, in preference to

alternatives such as recycling, tends to be explained by the relatively low cost of landfilling in South

Africa, relative to alternative options, which means that there is no incentive for municipalities to

divert waste away from landfill towards alternatives. As such, there is much emphasis on economic

instruments1 (see Section 4) as a means of ‘getting the prices right’ and creating incentives for

moving up the waste management hierarchy in South Africa; that is, for diverting waste from landfill

towards alternatives such as recycling. For example, DEA recently commissioned a study to

investigate the role of landfill taxes as a means of raising the costs of landfilling in South Africa, and

thereby to create incentives for alternative waste management options (DEA, 2018b).

However, the implementation of economic instruments imposes high administrative demands

(Pearce and Turner, 1994; Inter-American Development Bank, 2003), and requires the fulfilment of

a number of pre-conditions. These include well-functioning markets (Inter-American Development

Bank, 2003); adequate institutional capacity to monitor compliance and ensure adequate

enforcement (United Nations Environment Program, 2005), and to ensure that perverse incentives

(such as illegal dumping) are avoided; and political will, particularly given the likelihood that many

economic instruments (particularly taxes and charges, which may impact negatively on business

competitiveness and social equity) will be politically unpopular. In a developing country context,

many of these pre-conditions are unlikely to be fulfilled.

In addition, while economic instruments have significant theoretical advantages over other types of

policy instruments, such as regulatory instruments; in practice, if they not evaluated carefully prior

to implementation, they can end up doing more than harm than good. For example, in the case of

waste management, economic instruments can lead to a host of perverse incentives and

unintended consequences (such as illegal dumping). In addition, landfill taxes levied on

municipalities will either be passed on to waste generators in the form of higher tariffs; or, if they

cannot be passed on through higher tariffs, they will negatively impact on municipal finances. As

such, issues around affordability and resulting distributional impacts (e.g. potential negative

impacts on poor households and small businesses) also need to be taken into account.

As such, according to the National Pricing Strategy for Waste Management (Department of

Environmental Affairs, 2016), before a decision can be made to implement a particular type of

economic instrument, it is crucial to evaluate the range of instruments available, in order to select

the right type of instrument for the issue at hand, and to avoid potential negative unintended

consequences. In others words, there is a clear need to understand the root causes of the problem,

and to consider the full range of potential interventions for addressing these root causes (in addition

1 Economic instruments, in contrast to regulatory or ‘command and control’ policy instruments, are a type of

environmental policy instrument that seek to change behaviour indirectly; by changing the relative prices (and

hence incentives) that individuals and businesses face. Specifically, they are aimed at addressing market

failures, such as externalities, i.e. the positive or negative side effects (external benefits or costs) of a

particular economic activity or process, which are not incurred by those undertaking the activity, but are

instead borne by other parties, broader society, and/or future generations. Examples include pollution arising

from the production of a particular product; the costs of which are not typically incorporated within the costs

of production, or within market prices for the product in question; and are therefore not taken into account by

producers or consumers of that product. Economic instruments aim to ‘internalise’ these external costs within

private costs and benefits (market prices), such that they are taken into account in decision making.



to economic instruments), in order to ensure that the most appropriate instrument or instruments

for addressing the problem can be identified.

1.2 Aims of the study

Originally, the objectives of the study were as follows:

1. To understand the root causes of the current price differential between landfilling and

alternative waste management options in South Africa

2. To identify potential instruments that can be used by national and provincial government

to incentivise municipalities to increase diversion of waste away from landfill

3. To document lessons learned from the implementation of these instruments in other

countries

4. To evaluate these instruments based on a broad range of relevant criteria, in order to

identify the most appropriate instruments in the South African context

5. To develop a Decision Support Tool that can be used for example by provincial government

to inform instruments that can be implemented in their specific context.

During the course of the research, however, it became necessary to refine the objectives to a certain

extent, for a number of reasons. Specifically:

- Objective 1: At an early stage during the research, it was found that there are a number of

root causes for the dominance of landfilling as a waste management option, aside from

simply the issue of the low cost of landfilling relative to alternatives. It was seen as being

important to understand the ‘bigger picture’ in terms of all possible reasons as to why the

majority of waste in SA is still being landfilled; in addition to simply the difference in cost

between landfilling and alternatives; in order to be able to recommend an appropriate

solution or solutions. Objective 1 was therefore broadened to include other potential root

causes for the dominance of landfilling as a waste management options, in addition to the

issue of cost.

- Objective 2: Similarly to the case of Objective 1, the need was identified to broaden

Objective 2 beyond identifying only those instruments that can be implemented by national

and provincial government, and only those targeted at municipalities. Instead, there was a

need to start by identifying the broader range of instruments that could be implemented to

address the issues identified under Objective 1, and to increase the diversion of waste from

landfill; irrespective of who the instrument would be implemented by, and who the target

of such instruments would be. Thereafter, under Objectives 4 and 5, the broad range of

instruments identified would be refined to focus on those that are most relevant to the

South African context and to addressing the root causes identified in Objective 1; and

specifically to focus on economic instruments that can be implemented by national

government to incentivise the increased diversion of waste form landfill.

- Objective 4: After the broad range of potential instruments for increasing diversion of waste

from landfill was identified (Objective 2), it became evident that evaluation of these

instruments using the Multi-Criteria Decision Analysis (MCDA) approach, as originally

intended, would not be appropriate. MCDA and related methodologies are designed to

compare and rank among a set of options (e.g. alternative policy instruments), in order to



identify a preferred option. However, in the case of the broad range of instruments

identified under Objective 2, the instruments in question should not be seen as alternative,

mutually exclusive instruments that can be compared on a one-to-one basis. Instead, they

are a range of instruments aimed at addressing different aspects of a very complex problem.

As such, there is a need to consider a suitable combination of instruments that should be

put in place to address the various issues (i.e., to address the complex range of root causes

identified in Objective 1). As such, instead of assessing the instruments based on an MCDA

type of approach, the instruments were rather assessed in terms of their suitability for

addressing the various issues identified in Objective 1, specifically within the South African

context.

- Objective 5: At the time that the study was conceived, it was initially thought that a decision

support tool would be developed for use by, for example, provincial government, to inform

the selection of instruments that can be implemented within their specific context.

However, during the course of the research, it became evident that

o most economic instruments would typically need to be implemented at a national

government level; and that

o there was a need to provide practical guidance to national government in terms of

the implementation of economic instruments.

As such, the study ultimately ending up having the following objectives:

1. To understand the root causes for the dominance of landfilling as a waste management

option in South Africa

2. To identify potential instruments that can be implemented to increase the diversion of

waste away from landfill

3. To document lessons learned from the implementation of these instruments in other

countries

4. To evaluate these instruments based on their suitability to address the root causes

identified in Objective 1, in the South African context.

5. To develop a guideline for national government to inform the implementation of economic

instruments to incentivise the diversion of waste away from landfill.

In this way, the study aimed to provide evidence-based information to support national government

decision making regarding the selection, design and implementation of economic instruments for

incentivising the diversion of waste away from landfill towards alternative waste management

options.

In addition, the project also looked more broadly at the range of actions required by all relevant

role-players in order to move up the waste hierarchy in South Africa. Given the complex nature of

the problem, and the broad range of issues to be addressed, no single type of intervention on its

own is likely to be effective; nor will actions by any one role-player be effective in isolation. Instead,

a suite of coherent and complementary interventions will be required, with action required by all

relevant role-players.



1.3 Structure of this report

This report is structured as follows. Section 2 describes the approach to the study. Section 3

summarises the root causes for the dominance of landfilling as a waste management option in South

Africa (Objective 1 of the study as outlined above). Section 4 identifies the range of economic,

regulatory and other policy instruments that could potentially be applied to increase the diversion

of waste from landfill (Objective 2), and reviews lessons learned from their implementation in South

Africa and other countries (Objective 3), based on local and international literature. Section 5

overlays the root causes identified in Section 3 with the potential instruments identified in Section

4, in order to identify those instruments that are most suited to addressing the root causes in the

South African context, and which can therefore be used as ‘Levers for Change’ to increase the

diversion of waste from landfill in South Africa (Objective 4). In Section 6, we focus in specifically on

the economic instruments that could play a role, with a specific focus on those that could be

implemented by national government; and provide some guidance regarding their potential

implementation in the South Africa context (Objective 5). The information in this section is also

provided in a dedicated guideline intended for national government, which aims to provide practical

guidance regarding the selection, design and implementation of economic instruments for

incentivizing the diversion of waste from landfill toward alternative waste management options.

2 Research Design and Methodology

The project consisted of four main phases; namely scoping, review, assessment, and reporting. Note

that the focus of some of these phases changed slightly as compared to what was originally

envisaged, in line with the refinement of the objectives of the project as described in Section 1.2.

Ultimately, the four phases focused on the following:

1. Scoping: Identification of key stakeholders to engage; and determination of the root causes

for the predominance of landfilling as a waste management option in South Africa, i.e. for

the failure to divert waste towards alternative waste management options; based on a

review of relevant local literature and reports; and consultation with relevant experts and

stakeholders.

2. Review: Identification of relevant economic, regulatory and other instruments that can

potentially be used to address the root causes identified in Phase 1, and to increase the

diversion of waste away from landfill toward alternative waste management options; and a

review of lessons learned from the implementation of these instruments in South Africa and

other countries. This consisted of literature reviews, as well as discussions with key

stakeholders and experts.

3. Assessment: Evaluation of the identified instruments in terms of their applicability to the

South African context; and specifically to address the root causes identified in Phase 1, and

to incentivise the diversion of waste from landfill toward alternatives; in order to prioritise

instruments that are most suited to addressing the issues (with a focus on those that can

be implemented by national government).

4. Reporting: Development of a guideline for national government to inform the

implementation of economic instruments to incentivise the diversion of waste away from



landfill; as well as related project deliverables (including this report, a journal article, a

briefing note, and a powerpoint presentation).

3 Root causes for the dominance of landfilling as a waste management

option in South Africa

Phase 1 (Scoping) focused on Objective 1 of the study; that is, on understanding the root causes as

to why the majority of waste in SA is still being landfilled rather than diverted to alternative waste

management options (that is, to identify the obstacles to implementing the waste hierarchy in SA).

Phase 1 was conducted by means of both a review of relevant local literature and reports; as well

as two dedicated expert consultation workshops (see Figures 2 and 3), conducted on 28 March 2019

in Gauteng (Pretoria), and 3 April 2019 in the Western Cape (Stellenbosch). In addition, further

insights were obtained from a range of additional one-on-one meetings with experts and

stakeholders.

Figure 2: Some of the issues identified during the Pretoria workshop



Figure 3: Some of the issues identified during the Stellenbosch workshop

A wide range of root causes for the dominance of landfilling were identified during Phase 1. These

can be grouped into six broad categories of issues, as follows:

1. Legislative barriers

2. Low cost of landfilling

3. High cost of alternative waste management options

4. Lack of funding and other resources

5. (Perceived) lack of benefits from alternative waste management options

6. Behavioural and institutional issues

The following sub-sections unpack these issues in more detail.

3.1 Legislative barriers

3.1.1 Municipalities are mandated to collect and dispose

The mandate of municipalities, as enshrined in the Constitution, is the collection and disposal of

waste. Implementing alternative waste treatment technologies, such as recycling, is not seen by

municipalities as being their responsibility.



In line with this mandate, Key Performance Indicators (KPIs) for municipal solid waste managers are

focused on disposal of waste to landfill, and there is therefore no incentive to divert waste away

from landfill.

3.1.2 The NWMS does not allocate and delineate responsibilities

Section 6(3)(b) of the Waste Act states that the National Waste Management Strategy (NWMS) may

allocate and delineate responsibilities in line with Section 3; which specifies that it is the duty of the

state to put in place measures to ensure that waste generation is reduced; and that waste is reused,

recycled and recovered in an environmentally sound manner, before it is safely treated and

disposed of.

The 2011 NWMS (DEA, 2011) put in place targets for waste diversion from landfill, but failed to put

measures in place to ensure waste reduction, reuse, recycling, and recovery. The updated 2020

NWMS (DEFF, 2021) is similarly not clear on roles and responsibilities. Section 9 does not clearly

distinguish who should do what to enable diversion of waste from landfill.

The end result is that no action is taken. Municipalities wait for industry to take action, while

industry wait for government to create an enabling environment to support waste reduction, reuse,

recycling, and recovery.

3.1.3 Legislation makes it difficult for the private sector to get involved

Certain legislation disincentivises or inhibits private sector participation or investment in waste

diversion or beneficiation activities; or makes it a long and complex process to get projects off the

ground. These obstacles include:

The classification of materials as falling under the definition of waste makes beneficiation

of such waste streams difficult, as such activities are then classified as waste management

activities, for which a Waste Management License (WML) is required, environmental

impact assessments (EIAs) must be conducted, etc.; in accordance with the Waste Act.

These can be cumbersome and costly processes to undertake.

Municipal by-laws assign ownership of waste to municipalities. Waste is considered to be

a municipal asset and therefore private sector involvement requires processes under the

Municipal Finances Management Act (MFMA) (Act no. 56 of 2003). A municipality cannot

simply give away municipal assets. It is therefore difficult for the private sector to access

such waste streams for beneficiation.

Some stakeholders mentioned that procurement rules under the Municipal Finances

Management Act (MFMA) favour a three year limits on contracts. This period is too short

for private sector operators to recoup investment in capital infrastructure, which typically

has a longer pay-back period; and as such disincentivises such investment. However, other

stakeholders noted that the MFMA does make provision for contracts beyond three years,

through an application to National Treasury, although there seems to be a lack of

awareness around this or of how such exemption can be obtained.



Procurement, compliance and regulatory obstacles and red tape make it a difficult and

lengthy process to establish public-private partnerships (PPPs).

3.2 Low cost of landfilling

One of the main reasons for the predominance of disposal as a waste management option in South

Africa relates to the low cost of disposal, in comparison with alternative waste management

options. There is a common understanding that landfilling is ‘under-priced’ – that is, that the cost

of landfilling is artificially low, which creates a perverse incentive for the continued preference of

disposal as waste management option. It is generally understood that getting the ‘prices right’, i.e.

increasing the cost of landfilling to reflect the true cost of this management option, would create

incentives for waste to be diverted away from landfill towards alternatives.

However, in order to get the prices right, it is first critical to understand the factors at play behind

the current low cost (and low price)2 of landfilling. The review of relevant literature and engagement

with stakeholders revealed that there are a number of reasons as to why landfilling is currently too

‘cheap’ in South Africa:

3.2.1 Many landfill sites in South Africa are unregulated, unlicensed and/or non-compliant, and

therefore the cost of landfilling is artificially low.

According to DEA (2018b), based on information reported to the South African Waste Information

System (SAWIS), there are 826 landfills in South Africa (both operating and decommissioned), of

which 667 (81%) are licensed in terms of the National Environmental Management: Waste Act, 2008

(No. 59 of 2008).

However, there are indications that there are also a large number of unregulated dump sites in

South Africa, which are neither licensed nor reported on SAWIS. For example, according to

GroundWork (2014), there are a total of 1347 waste disposal sites in South Africa, of which 639

general waste sites and 58 highly hazardous sites are unlicensed. Data from the General Household

Survey suggests that “28% of households dispose of waste in an ‘own refuse dump’” (DEA, 2018b:ii);

particularly in rural areas. This suggests that the number of unregulated sites is high.

DEA has spent R32 million on a campaign to get 258 unlicensed municipal landfills licensed between

2013 and 2016 (DEA, 2018b). This programme is reported as being successful (DEFF, 2021).

However, DEA (2018a and 2018b) highlights that even among facilities with Waste Management

Licenses (WMLs), there are a number of facilities that are contravening the conditions of these

licenses. In particular, compliance among public waste management facilities is generally low (DEA,

2 It is important to distinguish between the ‘cost’ and ‘price’ of landfilling. In the case of municipal landfill sites, the cost refers to what it costs the municipality to dispose of waste to landfill, per tonne. The ‘price’ refers to landfill gate fees and/or waste tariffs. In theory, the cost of landfilling determines whether there is an incentive for municipalities to seek alternatives; while gate fees and waste tariffs (in theory) influence the behavior of private disposers and waste generators respectively. Generally speaking, both the costs and the price of landfilling are currently low in South Africa, so there is no incentive for municipalities, private disposers or waste generators to seek alternatives.



2018a). Indeed, DEA acknowledges that even following the successful licensing campaign, many of

the licensed landfill sites still did not have the requisite infrastructure to ensure that they are

operationally compliant (DEA, 2018b), and as such there are ongoing challenges associated with

non-compliance with permit conditions (DEFF, 2021), and with monitoring and enforcement of

legislation.

The net result of landfills being unregulated, unlicensed, or non-compliant with their license

conditions is that many disposal sites in South Africa are not properly engineered sites, and are

deficient in terms of infrastructure and/or operating standards; and as such the costs of landfilling

are artificially low.

In particular, many landfill sites do not comply with the Norms and Standards for Disposal of Waste

to Landfill (DEA, 2013); which “increased the specifications, and hence the capital costs, of landfills”

(DEA, 2018b). Specifically, the Norms and Standards specify minimum engineering requirements for

containment barrier design to prevent leachate and other negative environmental impacts; which

implies a significant increase (nearly double when compared to the Minimum Requirements) in the

cost of developing new landfill sites and cells that meet these requirements. The significant increase

in cost “has been felt by those municipalities who needed to construct new cells or new landfills”

(DEA, 2018b) in compliance with the new standards. To the extent that these requirements are not

met, however, the cost of landfill disposal will be too low. Many municipalities, particularly in cases

where landfills were constructed prior to 2013, do not yet comply with the standards, “and thus the

cost of landfilling is artificially low” (DEA, 2018b).

Specifically, the Norms and Standards specify minimum engineering requirements for containment

barrier design to prevent leachate and other negative impacts; which implies a significant increase

in the cost of developing new landfill sites and cells that meet these requirements. To the extent

that these requirements are not met, however, the cost of landfill disposal will be artificially low.

3.2.2 Lack of full cost accounting and cost recovery for waste services

Even if waste disposal standards and permit conditions are being met, and the actual costs of

disposal to landfill are in line with what municipalities “should” be spending; in many cases, solid

waste tariffs (charged to waste generators for waste collection and disposal services) and landfill

tipping fees (charged to waste generators for disposing of waste directly at municipal landfill sites)

are set too low to reflect these costs. This means that municipalities are not obtaining sufficient

revenues to properly maintain and improve landfill infrastructure. It also implies that there will be

no incentive for waste generators to reduce the amount of waste that they generate, or to seek

alternative waste management options, such as recycling (DEA, 2018b).

There are a number of reasons why solid waste tariffs and tipping fees among South African

municipalities do not reflect the costs of providing waste services (see DEA, 2018b), including:

The way in which municipalities source funds for capital infrastructure. In many cases,

funding for solid waste infrastructure forms a relatively small component of a larger

loan for the municipality’s overall capital programme, which is repaid through general



revenues, rather than through ring-fenced solid waste revenues. In other cases,

funding is obtained through capital grants; and since municipalities are not required to

depreciate grant-funded assets, the associated capital expenditure is not reflected in

operating costs, and is therefore not taken into account in the calculation of tariffs

(DEA, 2018b).

Lack of full cost accounting. Full cost accounting (FCA) is a systematic approach to

identifying and quantifying the full cost of providing a service, including not only

current and direct capital and operating costs; but also the indirect, past and future

costs of providing the service; including overhead costs, maintenance costs,

administration costs, replacement costs, and interest charges. Importantly in the

context of waste disposal services, full cost accounting includes future costs that are

directly related to current activities, such as the costs associated with landfill closure

and post-closure (including rehabilitation) (DEA, 2012; DEA, 2018b). The Municipal

Solid Waste Tariff Strategy (DEA, 2012) promotes the principle of full cost accounting

for waste services, while the National Waste Management Strategy (DEA, 2011) set a

target for all municipalities to conduct full cost accounting for waste services (and to

set cost reflective tariffs) by 2016. However, according to DEA (2018b) and DEFF

(2021), aside from the large metros, very few municipalities have achieved this.

Tariffs must be approved by municipal councils, who are obliged to balance cost

recovery objectives with affordability to ratepayers (DEA, 2018b); such that actual

tariffs may be lower than those required to ensure cost recovery.

Solid waste tariffs are generally set as a flat monthly fee, or flat fee per bin, rather

than taking into account the actual quantity of waste generated (DEA, 2018b); and as

such they do not reflect the costs per tonne of waste generated (nor do they create

incentives for reduced waste generation).

Municipalities are obliged to provide solid waste services to indigent households for

free (DEA, 2018b); such that no tariffs or fees are applicable in this instance.

Many municipalities charge very low landfill tipping fees, or do not charge for the first

tonne disposed; or, in some cases, do not charge landfill tipping fees at all. Typically

this is done to avoid stimulating illegal dumping, or because of a lack of weighbridges

(DEA, 2018b).

3.2.3 Externalities are not internalized

Externalities refer to the positive or negative side effects (external benefits or costs) of a particular

economic activity or process that are not incurred by those undertaking the activity (e.g. the

producer of a particular product), but are instead borne by other groups in society and/or by future

generations; or are dispersed throughout society as a whole (Nahman, 2011). Typical examples of

externalities are environmental and social impacts, such as pollution. In the absence of some form

of government intervention, externalities are not incorporated in the direct financial cost associated

with the activity or process in question, and are therefore not internalised in prices associated with

that activity or product. As such, in the case of negative externalities (such as pollution), prices will

be too low, and as such there will be no incentive to reduce use or consumption of that particular

activity or product.



Landfilling gives rise to negative environmental externalities in the form of leachate generation and

emissions of methane (a component of landfill gas), which is a powerful greenhouse gas; as well as

negative social externalities in the form of noise, odour, litter, vermin and dust (Nahman, 2011).

This is therefore another reason as to why the costs of landfilling appear too low as compared to

the ‘true’ cost, and as to why solid waste tariffs and landfill gate fees are too low, thereby not

incentivising a reduction in waste generation.

It is important to note, however, that the external costs associated with landfilling can be mitigated

to a certain extent through improved landfill infrastructure and management. For example, fully

engineered landfill sites, constructed with liners to contain leachate, and landfill gas capture

systems to prevent methane emissions, will have a lower environmental impact. In this case, the

external costs of landfilling would have been internalised in ‘private’ costs (that is, the costs to the

municipality of constructing and managing the landfill site). There therefore tends to be a trade-off

between private costs and external costs. Engineered landfill sites, which are compliant with norms

and standards, will have higher capital and operating costs, but lower environmental costs; whereas

non-compliant landfill sites will have lower capital and operating costs, but higher environmental

costs. It is therefore clear that addressing the artificially low costs of landfilling through compliance

with the norms and standards (see Section 3.2.1 above) will not only raise the cost of landfilling,

thereby creating incentives to divert waste toward alternatives, but will also reduce the

environmental impact associated with landfilling.

3.3 High cost of alternative waste management options

Although alternative waste treatment technologies give rise to a number of benefits, such as cost

savings associated with the extension of landfill lifespans (see Section 3.5); they can also be costly

to implement. Costs are likely to be particularly high in the absence of the required economies of

scale.

In particular, alternative treatment technologies tend to be waste stream-specific, and require a

higher level of segregation of waste into different fractions, which increases the costs of waste

management relative to the traditional model of collect and dispose. On the other hand; where

waste has not been separated at source; additional pre-processing steps (such as sorting and

washing) are required, which increases the capital and operating costs of the downstream

processing industry.

As such, relative to landfilling, alternative waste management options generally have:

high capital costs (e.g. additional vehicles required for separate collection; new

infrastructure required for sorting, treatment and processing; etc.); and

high operating costs (e.g. costs associated with separate collection of waste, energy costs

associated with processing, etc.).



3.4 Lack of funding and other resources

The relatively high cost of alternative waste management options (as compared to landfilling) is

generally seen as unaffordable to municipalities, who do not have funds either to invest in CAPEX,

or for the ongoing OPEX. In addition, there is lack of other necessary resources, including the

requisite skills and data. Some specific issues in this regard are as follows:

3.4.1 Lack of funding for capital infrastructure

The capital infrastructure required for alternatives is not suited to funding from municipal sources

(such as tariffs); instead, municipalities rely on funding from national sources for such infrastructure.

Currently, the Municipal Infrastructure Grant (MIG) is the only source of funding from national

government that can be accessed by municipalities for waste-related infrastructure. However,

waste projects have to compete with projects from other sectors (e.g. water, sanitation and

electricity), which are typically prioritised (World Bank, 2019a).

As a result, and taking into account the high cost of such infrastructure (see Section 3.3), there is a

lack of infrastructure and equipment for the collection, sorting and processing of waste; for

example, a lack of vehicles (or unsuitable vehicles) for separate collection of recyclables, a lack of

materials recovery facilities (MRFs), a lack of processing capacity, etc.

3.4.2 Difficult to raise tariffs

Covering the higher OPEX costs associated with alternatives would require that tariffs are raised,

which is difficult from a political and affordability perspective. As a result, and taking into account

the higher operating costs involved (see Section 3.3), there is a lack of separate collection, sorting

and processing of waste. For example, most municipalities do not currently implement separation

at source programmes. As such, the quality and quantity of waste recovered is not sufficient for

alternative treatment or recycling.

3.4.3 Lack of skills

Municipalities generally lack skills and capacity for waste management (for example, municipal solid

waste officials are often not trained in waste management); and many municipalities still struggle

with the basics (collection and disposal). In particular, there is a lack of expertise and knowledge to

understand and properly assess the wide range of alternative technology options and their

appropriateness (and associated risks), leading to confusion and uninformed decisions, or inaction.

In particular, there is a lack of understanding regarding economic and financial aspects. For example,

there is a lack of expertise to conduct full cost accounting; to quantify the value of waste; and to

properly assess the costs and benefits of landfilling vs. alternatives; including externalities, indirect

costs and benefits, and avoided costs.



3.4.4 Lack of data

Finally, there is a lack of data on the basis of which informed decisions can be made. For example,

in many municipalities, there is a lack of baseline information on the volumes and types of waste

generated, waste composition, and of whether the quality of the waste is suitable for specific

alternative technology options.

3.5 (Perceived) lack of benefits from alternative waste management options

In many cases, the financial benefits associated with diversion of waste from landfill are seen to be

too low to justify the relatively higher cost associated with alternative waste treatment. In some

cases, the benefits are not fully understood or appreciated and are perceived to be too low (see

Section 3.4.3), while in other cases, they are actually too low.

3.5.1 Where there is airspace available, there is no incentive to divert waste

In the case of municipalities who still have many years of available airspace, there is no apparent

benefit associated with saving landfill airspace (except in the very long term). Municipalities have

invested CAPEX in the establishment of landfills, so as long as there is still airspace remaining,

municipalities need to continue landfilling so as to recover these ‘sunk’ costs. In addition, some

OPEX costs (such as salaries) remain constant irrespective of the quantities of waste going to landfill,

so if there is less waste going to landfill, the costs per tonne of waste are higher.

3.5.2 Failure to properly understand or account for the benefits

Financial cost-benefit analyses and short-term municipal budgeting processes do not currently

incorporate externalities, indirect benefits, or avoided costs. Specifically, they do not account for

the value of waste, the long term benefits of diverting waste from landfill (particularly when there

are many years of landfill airspace still available, see above), or benefits in terms of the production

of energy and other by-products from alternative waste treatment).

3.5.3 Market prices are too low

In many cases, market prices for recyclables are too low relative to the costs of collecting and

recovering such materials; and as such there are no profits to be made from these activities, and

therefore no incentives for collection and recovery.

3.5.4 Fluctuating market price of virgin materials

The fluctuating market price of virgin materials (linked to global commodity prices) relative to

recycled materials means that there is no guaranteed market for recycled materials, which

disincentivises investment in recycling infrastructure.



3.5.5 Lack of markets

In many cases there is a lack of markets for recyclables, or for the end-products produced from

recycled materials.

For example, the global demand for recyclables has crashed as a result of the Chinese ban on waste

imports; while the local market is limited in many cases. A specific issue identified is the lack of off-

take agreements to guarantee a market.

3.5.6 Virgin materials tend to be cheaper

Some recycled materials (or the end products produced from such materials) are unable to compete

in the market, because virgin alternatives tend to be cheaper. This is particularly the case when oil

prices are low, which reduces the price of virgin plastics and other virgin materials, such that

recycled materials are unable to compete.

3.6 Behavioural and institutional issues

The current take-make-dispose linear economy model is a deeply entrenched status quo, and

therefore difficult to change. Transitioning toward a more circular economy model; and moving up

the waste management hierarchy away from disposal toward waste reduction, reuse and recycling;

requires commitment from all actors along the value chain – particularly producers, waste

generators, and municipalities; as well as national government, in terms of creating an enabling

environment. In addition, there is a need for improved collaboration and partnerships among the

various actors.

3.6.1 Lack of an effective enabling environment created by national government

There is a perception that legislation, policy and other initiatives are fragmented and

uncoordinated; and that decisions are made without a full understanding of the problem or without

the required information; and in particular without taking into account the local context.

3.6.2 Producers don’t take responsibility for their products at end of life

In the absence of Extended Producer Responsibility (EPR) schemes, producers generally do not take

responsibility for the waste generated as a result of the products that they put on the market;

managing this waste then becomes the municipality’s problem.

3.6.3 It is difficult to change deeply entrenched behavioural patterns among waste generators

There are a number of reasons as to why promoting recycling behaviour among waste generators

is difficult, including:

Behavioural patterns are affected by, among other things, values, attitudes and

culture (for example, South Africa is generally characterized by a ‘throwaway’



culture; while taking care of the environment is generally low on the priority list);

and are therefore deeply entrenched and difficult to change. In particular, people

do not tend to associate with waste, but see it as the municipality’s responsibility;

while the value of waste is not appreciated.

It is easier to simply throw waste in the trash; separating waste for recycling takes

additional time and effort.

There is a lack of knowledge or awareness around recycling – e.g. around how,

what and where to recycle.

Generally speaking, there is a lack of convenient recycling facilities in many areas,

and in particular a lack of separation at source with kerbside collection of

recyclables.

Even in cases where separation at source programmes are implemented,

participation rates are generally low. There are various reasons for this, including

a lack of awareness; poor service delivery, resulting in people losing faith in the

system, etc.

3.6.4 Institutional issues within municipalities

Since municipalities’ mandate is to collect and dispose of waste (see Section

3.1.1):

i. they do not see recycling as their responsibility.

ii. KPIs for municipal solid waste managers are focused on disposal of waste

to landfill, and there is therefore no incentive to divert waste away from

landfill.

iii. In line with this mandate; landfilling is, historically, what municipalities are

accustomed to doing. It is therefore seen as ‘easy’ and ‘convenient’. On

the other hand, alternatives are unchartered territory; and there is a fear

of the unknown, an unwillingness to take risks, and institutional resistance

to change.

There is a lack of accountability for the implementation of Integrated

Development Plans (IDPs) and Integrated Waste Management Plans (IWMPs); and

in particular, there is a lack of political will or commitment to implement

alternatives to landfilling.

Waste is low on the priority list for municipalities; funds tends to be directed to

other priorities; such as health, roads and sanitation; while there is also corruption

and mismanagement of funds.

Municipalities tend to operate in silos; there is a lack of shared learning,

participation, or learning from what has worked well previously.

3.6.5 Lack of collaboration and partnerships

Generally speaking, there is a lack of effective communication, collaboration and partnerships

among the various actors in the value chain. In particular, stakeholders noted that improved

collaboration and partnerships are required between producers, municipalities, and the South

African Local Government Association (SALGA); between municipalities and private sector waste



companies (in particular, a need was identified for increased involvement of private sector waste

management companies, e.g. through public-private partnerships (PPPs)); and between the formal

sector (municipalities and private sector collectors) and informal waste reclaimers.

4 Literature review: Review of policy instruments for diverting waste from

landfill

4.1 Introduction

Environmental problems, including those related to solid waste management, have traditionally

been addressed using ‘command-and-control’ regulations, which regulate behaviour directly, by

prescribing specific legislation and standards which must be achieved, and enforcing compliance

through the use of penalties and fines (Perman et al., 2003). By contrast, economic instruments

and incentives, such as environmental taxes and subsidies, seek to change behaviour indirectly; by

changing the relative prices (and hence incentives) that individuals and businesses face. In the

context of waste management, they can be used to provide incentives for waste generators

(producers and consumers), municipalities and service providers to reduce waste generation and to

seek alternatives to final disposal to landfill (such as re-use, recycling or recovery) (Inter-American

Development Bank, 2003).

Under a regulatory (command and control) approach, “the regulatory authority sets an

environmental standard (target) and the polluter is required to honour the standard, under the

threat of some penalty system” (Pearce and Turner, 1993:64). Thus, all polluters must achieve the

same standard, “regardless of individual differences in the ability to comply with the regulation”

(Inter-American Development Bank, 2003:7). In developing countries, including South Africa,

regulatory mechanisms still dominate environmental policy, including solid waste management,

with governments relying on public provision of waste management services, and regulatory

instruments to deal with the problems arising from waste generation and disposal (Pearce and

Turner, 1994; National Treasury, 2006).

However, “the option of using various economic instruments has emerged as an alternative to this

approach, in order to improve the efficiency and efficacy of waste management” (Inter-American

Development Bank, 2003:29). Economic instruments work through the price mechanism, i.e., they

seek to change behaviour indirectly; by changing the relative prices (and hence incentives) that

individuals and businesses face.

In particular, economic instruments are aimed at addressing market failures, such as externalities,

which distort market prices, thereby providing price signals for behaviour that is sub-optimal from

an overall social perspective. Externalities refer to the positive or negative side effects (external

benefits or costs) of a particular economic activity or process, which are not incurred by those

undertaking the activity, but are instead borne by other parties, broader society, and/or future

generations. Examples include pollution arising from the production of a particular product; the

costs of which are not typically incorporated within the costs of production, or within market prices

for the product in question; and are therefore not taken into account by producers or consumers of



that product. Externalities therefore drive a wedge between ‘social’ costs and benefits on the one

hand (i.e., the overall costs and benefits to society of a particular activity, inclusive of both private

costs and external costs); and ‘private’ costs and benefits on the other (i.e., market prices, which

influence the behaviour of producers and consumers). Economic instruments aim to ‘internalize’

these external costs within private costs and benefits (market prices), such that they are taken into

account in decision making.

Economic instruments have grown in importance in developed countries since the 1980s, where

experience has shown that they can be highly effective in achieving environmental objectives, such

as reducing waste generation or diverting waste from disposal to recycling, provided that adequate

enforcement mechanisms are in place (Forum for Economics and the Environment, 2002; United

Nations Environment Program, 2005). There has also been growing interest in the use of such

instruments in developing countries, where they appear to have some important advantages over

command-and-control (Pearce and Turner, 1994; Bell and Russell, 2002; Inter-American

Development Bank, 2003). These include cost effectiveness, promotion of economic efficiency,

incentives for innovation, the potential for self-regulation, and the potential for revenue generation.

In turn, revenues can be used in various ways (depending on the extent to which such revenues can

be ring-fended), such as to finance related environmental expenditures (such as improved waste

management services in the case of solid waste management) or policies (such as subsidies), or to

reduce distortionary taxes elsewhere in the economy, such as on labour, thereby generating a

‘double dividend’ (National Treasury, 2006).

In the context of waste management, economic instruments are “incentives or disincentives that

influence waste generators – both consumers and producers – [as well as service providers, such as

municipalities and recycling companies] to minimise, recycle or recover waste” (Inter-American

Development Bank, 2003:8). In theory, economic instruments are able to ‘internalise’ the

externalities associated with solid waste; that is, to close the gap between private and social costs;

thereby ensuring that an optimal’3 level of waste is generated, and that an optimal combination of

recycling and landfilling occurs (Pearce and Turner, 1993).

Generally speaking, externalities can be internalised either by taxing environmentally damaging

activities, such as landfilling; or by subsidising environmentally beneficial activities, such as recycling

(Turner et al., 1996:29). For example, in the case of disposal of waste to landfill, there are ‘negative’

externalities in the form of environmental, social and health impacts; such as emissions of leachate

and methane, odours, visual impacts, etc. (Nahman, 2011). Landfill taxes aim to internalise these

externalities within market prices (landfill tipping fees and/or waste tariffs), by incorporating the

external costs within the private costs of those undertaking the activity (e.g. the landfill

owner/operator); such that they can then be incorporated within market prices; thereby creating

incentives for a reduction in disposal to landfill.

3 The concept of an ‘optimal’ level of waste generation refers to the fact that ‘zero waste’ is unlikely to be

economically efficient (since the overall social costs of achieving zero waste, even if physically possible, are

likely to outweigh the benefits). Instead, there is likely to be a non-zero level of waste generation, beyond

which the costs of any further reduction in waste will outweigh the benefits.



On the other hand, relative to landfilling, recycling gives rise to ‘positive’ externalities, in the form

of improved environmental and social outcomes (e.g. job creation). In this case, subsidies may be

warranted. Subsidies essentially act in the opposite direction to taxes - they aim to support activities

that give rise to positive environmental and social externalities.

Generally speaking, the most common examples of economic instruments within the field of solid

waste management fall within one of the following categories:

1. Taxes and charges on activities generating negative externalities (e.g. waste generation or

disposal to landfill), which increase the private costs associated with these activities, such

that the external costs are ‘internalised’, i.e. such that the relevant actors take full social

costs into account, and thus reduce their level of the activity to the socially optimal level.

For example, such instruments have increasingly been used to change behaviour (i.e. reduce

consumption or waste generation; or encourage waste minimisation, recycling, reuse or

recovery) by making waste generators (producers or consumers) or service providers pay

per unit of waste generated or disposed of; either through taxes on waste-generating inputs

or products, or quantity-based (as opposed to flat) user charges for collection or disposal

services (Inter-American Development Bank, 2003).

Taxes and charges can act at various stages along the product-waste value chain (see Figure

4). For example, input or product taxes are upstream instruments, affecting the prices of

waste-generating inputs or products, thus affecting the incentives of producers and/or

consumers, so as to reduce the amount of waste generated (waste

avoidance/minimisation). However, if applied specifically to non-recyclable or hazardous

inputs or products, they can also have the effect of reducing the generation of non-

recyclable forms of waste (and thereby indirectly reducing the quantity of waste disposed

of to landfill, in favour of recycling); or the environmental impact of a given quantity of

waste.

Volumetric tariffs and disposal taxes, by contrast, are primarily downstream instruments,

affecting the price of waste collection and/or disposal services, and thus affecting the

incentives of waste generators and/or municipalities in terms of how a given quantity of

waste will ultimately be managed (e.g. disposal to landfill, vs alternative waste treatment

options such as recycling). In addition, however, by raising the costs of waste collection or

disposal, they also indirectly raise the costs of waste generation, and may therefore

ultimately reduce waste generation indirectly, by affecting the type or quantity of goods

purchased (Choe and Fraser, 1998).

2. Subsidies on activities generating positive externalities (e.g. recycling), which increase the

private benefits or reduce the private costs associated with such activities, such that the

external benefits are internalised. The result is that recyclers would be able to realise the

full social benefits of recycling, such that incentives are created to increase recycling to the

socially optimal level. Recycling subsidies, for example, “appear to offer some advantages

in the developing country context… [They] could involve fairly modest sums of finance but

still increase recycling activities” (Pearce and Turner, 1994:13).



3. Deposit-refund schemes (or deposit-refund systems), which involve a combination of taxes

and subsidies, and which also seem to be appropriate to the developing country context

(Inter-American Development Bank, 2003).

Examples of economic instruments that can be applied at various stages along the waste value chain

are provided in Figure 4 (DEA, 2016). Note that the different instruments can be implemented at

various points along the chain (upstream or downstream), at different levels (e.g. by national

government, municipalities or the private sector); and to target the behaviour of different actors

within the chain (e.g. producers, waste generators, or municipalities). The appropriate instrument

in any given case depends on whether the aim is primarily to reduce waste generation, to encourage

recycling activities, to divert waste from landfill, etc.

Figure 4: Examples of economic instruments along the waste value chain (Source: DEA, 2016).

The focus of this project is primarily on instruments aimed at creating incentives for the diversion

of waste from landfill, in favour of alternative waste treatment options, such as recycling. As such,

the focus is primarily on ‘downstream’ instruments for diverting waste away from landfill (as per

Figure 4); and not on the upstream measures required to reduce waste generation in the first place.

However, in line with the waste management hierarchy (Figure 1), it is clear that there is also a need

to focus on achieving waste avoidance and reduction, rather than solely relying on ‘end-of-pipe’

solutions to deal with the waste problem.

However, it is important to bear in mind that the implementation of economic instruments imposes

high administrative demands (Pearce and Turner, 1994; Inter-American Development Bank, 2003),

and requires the fulfilment of a number of pre-conditions. These include well-functioning markets

(Inter-American Development Bank, 2003); adequate institutional capacity to monitor compliance

and ensure adequate enforcement (United Nations Environment Program, 2005), and to ensure

that perverse incentives (such as illegal dumping) are avoided; and political will, particularly given



the likelihood that many economic instruments (particularly taxes and charges, which may impact

negatively on business competitiveness and social equity) will be politically unpopular. In a

developing country context, many of these pre-conditions are unlikely to be fulfilled.

It is therefore important to consider that, in addition to economic instruments, other types of policy

instruments can be used to change behaviour with respect to landfilling and alternative waste

management options. Specifically, in addition to economic instruments (also referred to as market-

based instruments), other categories of environmental policy instruments include regulatory

instruments (‘command-and-control’), and ‘softer’ types of instruments based on

education/awareness/information provision, voluntary approaches, and behavioural ‘nudges’.

Examples of regulatory instruments would include bans on certain waste types to landfill; while an

example of a ‘softer’ instrument is an information campaign to encourage recycling. In addition, it

is crucial that any instrument designed to discourage landfilling is accompanied by the provision of

alternatives; e.g. adequate recycling infrastructure and services; in order to reinforce the desired

behaviour, while reducing the likelihood of an increase in illegal dumping.

While economic instruments have significant theoretical advantages over command-and-control

instruments; in practice, they have often been shown to do more harm than good, and in many

instances they are not appropriate, particularly in a developing country context. For example, in the

case of waste management, economic instruments can lead to a host of perverse incentives and

unintended consequences (such as illegal dumping). In addition, landfill taxes levied on

municipalities will either be passed on to waste generators in the form of higher tariffs; or, if they

cannot be passed on through higher tariffs, they will negatively impact on municipal finances. As

such, issues around affordability and resulting distributional impacts (e.g. potential negative

impacts on poor households and small businesses) also need to be taken into account.

As such, according to the National Pricing Strategy for Waste Management (Department of

Environmental Affairs, 2016), before a decision can be made to implement a particular type of

economic instrument, it is crucial to evaluate the full range of instruments (including economic,

regulatory and other types of instruments) available, in order to select the right type of instrument

for the issue at hand. If not evaluated carefully prior to implementation, economic instruments

(such as landfill taxes) can end up doing more harm than good. It is therefore crucial that the right

type of instrument is selected to address the problem, in order to avoid potential negative

unintended consequences. Therefore, a wide range of possible instruments and incentives should

be investigated, in order to ensure that the most appropriate instrument or instruments for the

South African context can be identified.

DEA (2018b: iv) identifies three primary means to reduce the absolute volume of waste to landfill,

namely: “mechanisms to reduce overall waste generation; mechanisms to make landfill more

expensive; and mechanisms to make disposal alternatives more viable”. However, these three

categories exclude certain other type of instruments that could be included within a broader

categorisation; such as landfill bans, permit conditions, etc. In addition, each of these categories can

be sub-divided further as ‘regulatory’, ‘economic’, or ‘other’ types of instruments. As such, we

would suggest the following categorisation:



1. Instruments aimed at reducing waste generation o Regulatory o Economic o Other

2. Instruments aimed at discouraging waste to landfill o Regulatory o Economic o Other

3. Instruments aimed at making alternatives more viable o Regulatory o Economic o Other

In Table 1, a wide range of potential instruments for reducing the volume of waste going to landfill

are identified, based on a comprehensive review of both local and international literature. The

instruments are grouped in terms of their primary purpose (i.e. to reduce waste generation, to

discourage waste to landfill, or to make alternatives more viable); and then in turn they are broken

down further by category (economic, regulatory, or ‘other’ types of instruments). Although not

strictly part of the terms of reference for this study, ‘upstream’ instruments for reducing waste

generation are also included within Table 1 for the sake of completeness, since waste avoidance

and reduction still be prioritized as the ‘pinnacle’ of the waste hierarchy. Indeed, the most effective

way to reduce waste to landfill is to reduce the quantity of waste generated in the first place, as

opposed to relying purely on ‘end-of-pipe’ solutions.

However, for the remainder of this report, the focus is only on the latter two categories of

‘downstream’ instruments, namely those aimed specifically at discouraging waste to landfill

(Section 4.2); and/or making alternatives more viable (Section 4.3); since the focus of the study is

on instruments to incentivize diversion of waste from landfill to alternatives, and not on

mechanisms for reducing waste generation.

In Sections 4.2 and 4.3, we provide more detail on each of the instruments under these two

categories, and review lessons learned from their implementation both in other countries (and in

South Africa, where applicable). Note however that some of the specific instruments identified in

Table 1 are grouped together for the purpose of discussion in Sections 4.2 and 4.3, since they share

similar features.



Table 1: Potential instruments for reducing the volume of waste going to landfill

Primary

Purpose

Category Type Instrument

Reducing

waste

generation

Regulatory Standards Product standards limiting amount of

material, input, or packaging

Economic Taxes Input taxes

Packaging material levy

Product taxes

Advance disposal fees

Subsidies Subsidies to manufactures to reduce

use of inputs / packaging etc.

User charges Quantity-based (volumetric) waste

collection tariffs (pay-as-you-throw)

Other Education / awareness Awareness programmes and

behavioural ‘nudges’

Discouraging

waste to

landfill

Regulatory Licensing / permits Licensing of landfill sites

Quotas Non-tradable quotas

Enforcement Enforcement of license / permit

conditions

Penalties & fees Non-compliance fees

Bans Landfill bans

Economic Trading schemes Tradable landfill quotas

User charges / elimination of

perverse subsidies

Cost reflective gate fees

Differentiated gate fees

Taxes Disposal tax (landfill tax)

Funding Waste Infrastructure Development

Fund

Other Education / awareness Capacity Building

Awareness raising

Making

alternatives

more viable

Regulatory Legislation Legislative changes

Standards Product standards to increase

reusability/ recyclability

Product standards mandating use of

recycled materials or specifying a

minimum recycled content

Recycled product labelling.

Adapting building standards

Quality standards

Procurement policies Procurement policies mandating the

use of recycled products

Preferential pricing

"Set-asides"

Off-take agreements

Economic Elimination of perverse subsidies Elimination of subsidies on virgin

materials

Taxes Virgin material taxes

Advance recycling fee

Tax-subsidy combination Deposit-refund scheme



Primary

Purpose

Category Type Instrument

Subsidies Subsidies to producers

Subsidies to households

Subsidies to collectors

Subsidies to recyclers

Tax concessions Tax rebates / exemptions

Trading schemes Tradable recycling certificates

Funding Infrastructure Development Fund

Grants

Other Partnerships Multi-stakeholder decision making

PPPs

Integration of informal sector

Education / awareness Awareness raising

Training and development

EPR Various instruments to facilitate EPR

Separation at Source (S@S) Various instruments to facilitate S@S

4.2 Instruments aimed at discouraging waste to landfill

4.2.1 Licensing, enforcement, penalties and fees

One of the key drivers identified in Phase 1 of the study for the current low cost of landfilling relative

to alternatives, and therefore for landfilling being the preferred waste management option, is the

high number of unlicensed landfill sites; and, among those that are licensed, the high number of

sites that are non-compliant with their permit conditions (see Section 3.2.1). In this context, landfill

sites will not be operating according to best practice, and as such the costs of landfilling will be

artificially low.

For example, according to DEA (2018c), 56.4% of general waste landfill sites in South Africa are

unlicensed (see Table 2).

Table 2: Licensing status of general waste landfill sites in South Africa (DEA, 2018c).

Total number

of sites

Number of

licensed sites

Number of

unlicensed sites

% of unlicensed

sites

990 432 558 56.4

Furthermore, of those sites that are licensed, levels of compliance vary widely. In particular,

according to the final draft State of Waste Report (DEA, 2018a), “the level of compliance of the

publicly owned facilities that were audited was relatively low, with 26 facilities attaining between 0

and 25% compliance. Nine of these facilities attained 0%. Twenty four facilities attained between

26 and 50% compliance, nine facilities between 51 and 75% compliance, and 14 facilities between

76 and 100% compliance.”



It therefore stands to reason that the crucial first steps, before considering any other type of

instrument, are to

(1) ensure that all sites are licensed, which enables the setting of conditions (DEA, 2018b) to

ensure that sites are managed in accordance with the National Norms and Standards for

Disposal of Waste to Landfill (DEA, 2013); and

(2) enforce compliance with license conditions. Compliance of landfill sites with their license

conditions, set in accordance with the norms and standards, would improve the state of

landfill operations and thereby increase the cost of landfilling, and thereby potentially

avoid the need for additional economic instruments, such as a landfill tax.

Permit conditions could also be used to allow or disallow the disposal of particular waste streams

(DEA, 2018b); while landfill quotas, which specify a fixed quantity of waste which can be landfilled

per year, could also be considered.

Enforcing compliance could include mechanisms such as non-compliance fees / penalties. However,

it is also important to ensure that municipalities are provided with the financial support and capacity

development (see Sections 4.2.7 and 4.2.8) required to ensure that they are able to comply with

licensing conditions; e.g. through the provision of funding for infrastructure development to

improve the state of landfill sites.

4.2.2 Landfill bans

4.2.2.1 Mechanism

The objective of a landfill ban is typically to prevent specific waste types (such as particularly

voluminous or hazardous waste types) from being disposed at landfill, and thereby to reduce the

volume of waste going to landfill, or the impacts thereof. In addition, such bans are typically

implemented on waste types with a significant potential for material, nutrient or energy recovery,

and where alternative options are in place, in order to stimulate recycling or recovery (DEA, 2018b).

Some municipalities in South Africa have ad-hoc municipal level landfill bans in place for certain

waste types; particularly where other options exist; for example, “the banning of green waste to

certain landfills where a composting facility is available as an alternative” (DEA, 2018b:56).

For example, in the Western Cape, the provincial government has put in place a target to reduce

organic waste to landfill by 50% by 2022, and a complete ban by 2027 (Western Cape Department

of Environmental Affairs and Development Planning, 2018).

4.2.2.2 International experience

Landfill bans have been implemented in a number of European countries, as well as in some states

within the USA (DEA, 2018b). Importantly, however, such bans are typically not implemented in

isolation, but instead in combination with other types of instruments, such as



“differentiated taxes on landfilling and incineration, thus ensuring a viable business case for

capital intensive waste treatment facilities

development of standards for the use of recovered materials, thus supporting a market for

recovered materials

energy revenue incentives that either favours market access for heat/steam/electricity

produced from waste and/or ensures a premium sales price compared to traditional/fossil

energy sources)” (DEA, 2018b: 57).

Table 3 provides an indication of the percentage reduction in waste to landfill following the

introduction of a landfill ban in various countries, and the time period over which such reductions

were achieved. However, it should be noted that these reductions cannot necessarily be attributed

to the implementation of the ban alone; since in call cases the ban was implemented in combination

with other types of instruments (DEA, 2018).

Table 3: Reduction in waste to landfill following implementation of a landfill ban (source: DEA, 2018b)

Country / state % reduction in waste to landfill Time period over which reduction

was achieved (years)

Austria 25 7

Belgium - Flanders 22 10

Germany 26 6

Netherlands 25 11

Sweden 19 6

USA (Massachusetts) 3 2

4.2.2.3 Lessons for South Africa

Landfill bans have been shown to be relatively effective (in combination with other instruments) in

developed country contexts; although as mentioned above, the reductions in waste to landfill that

have been achieved cannot necessarily be attributed to the bans alone. However, a number of pre-

conditions need to be in place for landfill bans to be effective. These include:

“Efficient waste management legislation that clearly defines waste types, roles and

responsibilities, duty of care, ability to plan and direct waste, and… waste management fees

that are reflective of the full costs

Clear permitting conditions and standards for waste treatment and disposal facilities

Reliable waste data based on weighing and report of waste according to a standard

nomenclature and that payment of waste taxes are reliable and efficient

Compliance and efficient enforcement that ensures that the powers to direct can be utilized

and that undesirable and illegal activities can be detected and stopped efficiently

Predictable financing and capacity planning conditions allowing for long-term investment in

capital-intensive treatment facilities e.g. as concession agreements, PPP or traditional

prudential borrowing by the municipalities or their utilities” (DEA, 2018b: 57-58).



In addition, as discussed above, landfill bans need to be implemented in combination with other,

complementary instruments. In particular, it is necessary that viable alternatives are in place. In the

absence of alternative treatment options for the waste types being banned from landfill, bans are

likely to result in the affected waste types being illegally dumped.

4.2.3 Tradable quotas

Tradable landfill quotas are an innovative economic instrument that works along similar lines to

analogous ‘cap-and-trade’ type schemes dealing with other environmental externalities, such as

carbon trading schemes. In essence, municipalities are allocated a quota/allowance specifying the

amount of waste that can be landfilled per year. The total number of allowances issued can be set

in accordance with a target for the maximum total tonnages of waste to landfill (the ‘cap’). These

quotas can then be traded, thereby incentivising municipalities to reduce waste to landfill (as

municipalities who reduce waste to landfill can gain revenue by selling their quotas; while

municipalities who exceed their allocated quota will have to incur expenditure to purchase

additional allowances). In addition, the expected benefit of such a scheme is that landfill diversion

will be achieved at the lowest aggregate cost; since those municipalities who are able to divert

waste at a lower cost will do so and sell allowances; while municipalities who are not able to divert

waste at a low cost will rather purchase additional allowances. An overall diversion target can

therefore be met in the most cost-effective way (Jones, 2011), as diversion will be done primarily

by those municipalities who are able to do so at low cost.

An example of a tradable landfill quota system is the Landfill Allowance Trading Scheme (LATS) in

the UK. The scheme was discontinued in England as of 2013, when it was replaced with a Landfill

Tax; although it is still in place in Wales, Scotland and Northern Ireland, where it is known as the

Landfill Allowance Scheme (Chartered Institution of Waste Management, 2019). The aim of this

scheme was to achieve compliance (at least cost) with the EU Landfill Directive requiring member

states to significantly reduce the quantity of biodegradable municipal waste (BMW) sent to landfill.

The European Environment Agency (2013:4) deemed the LATS to be “a major driver of rapid landfill

diversion and recycling rates”; although Calaf-Forn et al (2014) describe the reductions in BMW as

“satisfactory”; with an average reduction of 7% per year during the first seven years of the scheme

(compared to a 4.2% annual reduction during the 4 years preceding implementation). After 2008,

the landfill tax became a more significant driver of waste diversion (European Environment Agency,

2013; Calaf-Forn et al., 2014). However, it is argued that “the Landfill Allowance Trade Scheme

(LATS) may have been an enabling factor in allowing [local authorities] in England as a whole to

divert MSW from landfill more rapidly than the Landfill Tax would have done alone (European

Environment Agency, 2013: 13).



4.2.4 Cost reflective gate fees

4.2.4.1 Mechanism

Another key driver identified in Phase 1 of the study for the current cost differential between

landfilling and alternatives, and therefore for the dominance of landfilling as a waste management

option, is that waste collection tariffs and landfill tipping fees are not reflective of the full costs of

landfilling (see Section 3.2.2).

For example, according to a survey undertaken by DEA (2018b: 45), half of the municipalities

sampled do not charge landfill gate fees, while those who do charge do so at below cost. In addition,

many do not charge at all for the first tonne of waste landfilled.

To the extent that the full costs of landfilling are not reflected in waste collection tariffs and landfill

gate fees, there is an implicit subsidy on landfilling; creating perverse incentives for landfilling as the

preferred waste management option.

There is therefore a clear need to ensure that tariffs are reflective of full costs, which would

incentivise waste generators to seek alternatives; before considering any potential economic

instruments, such as landfill taxes, which are likely to distort prices further. For example, one

suggestion put forward during the Phase 1 workshops was to provide training and development

(see Section 4.2.8) in full cost accounting. In addition, it is necessary to improve the state of

landfilling infrastructure and management itself in order to raise the actual costs of landfilling,

through ensuring licensing and compliance (see Section 4.2.1), and the provision of funding for

capital infrastructure (see Section 4.2.7).


According to DEA (2018b:47), across a sample of 16 countries, “landfill disposal charges, excluding

landfill taxes, range widely, from zero to R 2 025 per tonne. When landfill taxes are added, the range

of total landfill costs is from R423 to R2 380, with an average of R 1 442. This is approximately 7

times more than the average disposal fee (where fees are being charged) in South Africa, after

converting for purchasing power parity.” Table 4 provides examples of landfill tipping fees in a

number of countries, while also providing an indication of landfill taxes, in order to show the total

cost per ton of waste disposed.



Table 4: Landfill tipping fees and taxes in a number of countries (Source: DEA, 2018b)

Country Landfill tipping fee (R/t) Landfill tax (R/t) Total (R/t)

Austria 2 004 376 2 380

Belgium (Wallonia) 723 940 1 664

Cyprus 810 - 810

Czech Republic 231 289 521

Denmark 940 911 1 852

Estonia 579 174 752

Finland 868 434 1 302

France 883 231 1 114

Germany 2 025 - 2 025

Ireland 940 723 1 664

Italy 1 302 434 1 736

Netherlands 362 1 548 1 910

Sweden 1 519 709 2 228

UK (non-hazardous) 352 1 350 1 702

UK (hazardous) 12 282 1 350 1 632

USA Varies Varies 753

Australia Varies 0-1250 473


Cost-reflective landfill tipping fees would incentivise waste generators to seek alternatives to

landfilling. However, according to DEA (2018b: 47), “raising landfill fees will only affect the

behaviour of private operators and households taking waste directly to landfill, but will have no

direct impact on municipal-collected waste”. As with landfill taxes (see Section 4.2.6), they would

only incentivise reduced waste generation if they were passed on to waste generators in the form

of quantity-based waste collection charges, which are very difficult to administer; rather than as a

higher flat rate waste collection charge.

In addition, based on the survey undertaken by DEA (2018b); setting landfill tipping fees below cost

among South African municipalities seems to be done mainly “out of a fear of promoting illegal

dumping” (DEA, 2018: 47). As such, if landfill fees were increased, measures would need to be taken

to avoid an increase in illegal dumping; including the provision of viable alternatives.

4.2.5 Differentiated gate fees

4.2.5.1 Mechanism

Differentiated gate fees can be applied to different waste types; on the basis of, for example, the

different cost of treating specific waste types; or to create incentives / disincentives for specific

waste types to be landfilled; or to direct particular waste streams to particular types of facilities.

In the survey undertaken by DEA (2018b), 13% of the municipalities in the sample published

differentiated landfill fees for organic and Construction & Demolition (C&D) waste as compared to



general waste. However, the fees for organic and C&D were higher than for general waste in some

cases, and lower in other cases; “depending on the available alternatives, and what the municipality

is intending to incentivise. For example, Tshwane… does not charge for green waste and builders’

rubble delivered to dedicated sites for composting or reuse. However, if these wastes are delivered

to general waste sites, a punitive charge is levied” (DEA, 2018b:47).


Differentiated gate fees are applied in a number of countries. According to DEA (2018b), European

countries typically apply one or a combination of the following instruments to regulate flows of

waste to particular types of facilities:

- permit conditions allowing/disallowing flows of particular waste types (see Section 4.2.1)

- bans on specific waste types from being disposed at particular types of landfills (see Section

4.2.2)

- differentiated gate fees, based on the costs associated with treating different waste types

- differentiated disposal taxes, which should be designed to “reflect the aim of national

policies and desire to direct particular waste streams to particular types of facilities” (DEA,

2018b: 48) (see Section 4.2.6).

Which of these instruments are applied, and in what combination, “typically depends on the

enforcement and institutional capacity as well as the ability to make use of voluntary industry

approaches to achieving overall policy objectives” (DEA, 2018b: 48).


Differentiated gate fees are relatively easy to establish, but like disposal taxes, they “depend on

adequate systems of control and measurement at landfills, which are not currently in place in most

landfills” (DEA, 2018b: 48) in South Africa. Differentiated gate fees are “easily applied to ‘clean’

(homogenous) loads, but cannot be applied to mixed waste. If the intention… is to discourage a

particular waste stream, or to promote the separation of waste, then a punitive tariff must be set

for mixed waste containing the discouraged waste stream. In order to prevent a differentiated

landfill fee from promoting illegal dumping, it is important that viable alternatives are available

within a reasonable distance of landfills (or closer than landfills)” (DEA, 2018b: 48). For example, if

composting facilities are available nearby, higher gate fees can be set for organic waste at the

landfill, which would incentivise diversion to the composting facility instead (DEA, 2018b).

4.2.6 Landfill taxes

4.2.6.1 Mechanism

Landfill taxes are generally levied by national government, per tonne of waste disposed at landfill

sites. The aim is to increase the overall cost of landfilling, and thereby to discourage landfilling in

favour of alternatives. Specifically, landfill taxes are aimed at internalising the externalities

associated with disposal to landfill, such as landfill gas emissions (which contain methane, a

greenhouse gas which contributes significantly to climate change); and leachate emissions to soil



and groundwater. In the absence of landfill taxes, these externalities would not typically be

reflected in landfill costs.


Landfill taxes are applied in a number of countries across Europe, as well as in the USA and Australia.

Table 5 provides examples of landfill taxes in a number of countries, while also providing an

indication of landfill tipping fees, in order to show the total charge per ton of waste disposed (see

also Section 4.2.4).

Table 5: Landfill tipping fees and taxes in a number of countries (Source: DEA, 2018b)

Country Landfill tipping fee (R/t) Landfill tax (R/t) Total (R/t)

Austria 2 004 376 2 380

Belgium (Wallonia) 723 940 1 664

Cyprus 810 - 810

Czech Republic 231 289 521

Denmark 940 911 1 852

Estonia 579 174 752

Finland 868 434 1 302

France 883 231 1 114

Germany 2 025 - 2 025

Ireland 940 723 1 664

Italy 1 302 434 1 736

Netherlands 362 1 548 1 910

Sweden 1 519 709 2 228

UK (non-hazardous) 352 1 350 1 702

UK (hazardous) 12 282 1 350 1 632

USA Varies Varies 753

Australia Varies 0-1250 473

For example, the UK levies a weight-based landfill tax on disposals made by landfill operators, on

top of the normal tipping fee. Importantly, the aim of the tax is to internalise the external costs of

disposing of waste to landfill. However, the effectiveness of the landfill tax in reducing waste to

landfill is unclear. Waste to landfill fell by 70% between 2000 and 2016; while average household

recycling rates rose from 18% to 44%. However, these impacts cannot all be attributed to the tax;

since a number of other changes and instruments were implemented over the same time period

(DEA, 2018b).

Likewise, in Norway, the landfill tax is aimed at internalising the externalities of waste disposal. Sites

with lower environmental standards have a higher tax imposed on them, and vice versa. In the first

three years after implementation, landfilling rates halved and recycling increased by 25%; while

there was also increased investment in Waste-to-Energy (WtE) facilities, recycling initiatives,

separate collection & recovery of biowastes, etc. (DEA, 2018b).



In Australia, tax rates vary by state; but in most states are far higher than the external costs (which

in turn are lower than the private costs). Better managed sites have higher private costs and lower

external costs; and vice versa. However, the overall impact of the tax is debated. There is some

evidence that a relatively low tax is effective in Queensland; while an annually increasing landfill tax

rate in New South Wales appears to have been effective. “Waste tourism” was initially counteracted

by laws stating that waste must be disposed within 150km, but this was subsequently repealed due

to an inability to enforce (DEA, 2018b).

Figure 5: Landfill tax rates and % of municipal solid waste landfilled over time (Source: European Commission,

2012).

Figure 5 shows how landfill tax rates, as well as the % of municipal waste landfilled, has varied over

time in a number of European countries. In most cases, there is evidence of a correlation between

the landfill tax rate and increased diversion of municipal solid waste to landfill (DEA, 2018b). Again

however, it is important to note that correlation does not necessarily imply causation, given the

variety of different factors that affect the volumes of waste going to landfill.



However, landfill taxes may also result in illegal dumping, as in the UK case (Mizuno, 2001).

It is therefore important that viable alternatives to landfill are in place; such as recycling

infrastructure and end-use markets; to ensure that waste can be diverted toward an

appropriate alternative, and that the potential for an increase in illegal dumping can be

avoided.


International experience has shown that there are a number of pre-conditions that are required for

the implementation of landfill taxes:

1. Viable alternatives to landfilling need to be in place, both in order for the tax to provide

incentives for changing behaviour (DEA, 2018b), and to avoid illegal dumping:

Firstly, if the tax aims to change incentives away from landfilling towards

alternatives, municipalities and private disposers “need to be able to shift to

alternatives – be that increased recycling or alternative waste disposal” (DEA,

2018b: 52). Where these alternatives are absent, they need to be put in place (e.g.

funded by national government) before a landfill tax can be considered. Similarly,

“in order for households and businesses to respond to the price signal, they need

options for alternative behaviours to minimise cost. This implies that other

instruments… should accompany a landfill tax” (DEA, 2018b: 52).

Secondly, in the absence of such alternatives, landfill taxes are likely to lead to

perverse incentives and tax avoidance in the form of illegal dumping and disposal

at unregulated landfills. This would give rise to a “worse environmental outcome

than before” (DEA, 2018b: 52).

2. Implementation of landfill taxes therefore requires that municipalities have sufficient

capacity for “stringent control of illegal dumping sites” (Inter-American Development Bank,

2003:30).

3. Landfill taxes also require that municipalities or landfill operators are sufficiently financially

sound so that they are “in a position for the payment of a tax of this type, either directly or

indirectly” (Inter-American Development Bank, 2003:30).

4. They require effective landfill gate control and quantification of the amount and type of

waste entering landfills.

5. The tax needs to be applied universally to all public and private landfills, so as to avoid

‘waste tourism’ (DEA, 2018b).

6. There should not be any distortions in current prices. This implies that landfills should be

operated in accordance with best practice, so that the costs of landfilling act as appropriate

signals; and that landfill tipping fees and waste collection tariffs should be reflective of full

costs.

In developing countries, many of these conditions are lacking. As such, while landfill taxes have been

shown to be relatively effective in developed countries, “there is no experience in the use of this

type of tax” (Inter-American Development Bank, 2003:30) in developing countries.



In particular, municipalities in developing countries, including South Africa, tend to be financially

constrained, and are therefore generally “not in a position for the payment of a tax of this type,

either directly or indirectly” (Inter-American Development Bank, 2003:30). In South African

municipalities, the additional cost of a landfill tax would need to be covered either through grant

funding or through internal cross-subsidisation within the municipality (DEA, 2018b). As such,

“municipal finances will be negatively impacted by a landfill tax as they will have to pay a new charge

that may not be recoverable from customers, and will receive less tariff revenue if the objective of

diversion of waste is achieved” (DEA, 2018b: 52).

In addition, since alternatives to landfill are generally lacking, a landfill tax is not likely to create the

right incentives for diverting waste to alternatives, and is instead likely to lead to an increase in

illegal dumping. As with cost-reflective landfill tipping fees (see Section 4.2.4), the impact of landfill

taxes on household waste generation and disposal depends on the extent to which (and,

importantly, the way in which) they are passed on from waste collectors, landfill operators or

municipalities (on which they are levied) to households, in the form of higher waste collection

charges. If they are passed as quantity-based waste collection charges (‘pay-as-you-throw’), they

would in theory incentivise reduced waste generation. However, quantity-based waste collection

charges are particularly challenging to administer. On the other hand, if they are passed on in the

form of a higher flat rate waste collection charge, there will be no incentive to reduce the amount

of waste generated.

Furthermore, landfill sites in South Africa generally do not have adequate systems in place for

measurement and reporting on waste quantities and types being received (DEA, 2018b).

Municipalities also tend to have insufficient capacity for controlling the likely increase in illegal

dumping. Indeed, many municipalities don't charge landfill tipping fees at all, due to a lack of

resources, or fear of an increase in illegal dumping due to the lack of the necessary monitoring and

enforcement capacity. Without proper landfill gate control and quantification of the amount and

type of waste entering landfills, proper billing for disposal, and the capacity to address illegal

dumping, landfill taxes are likely to do more harm than good.

Finally, a landfill tax should only be considered once all landfills are licensed and fully compliant with

the norms and standards for landfilling, and once waste tariffs and landfill gates fees are cost

reflective so as to enable full cost recovery. If these conditions are met, the costs of landfilling would

naturally increase, which would in turn automatically create incentives for diverting waste from

landfill. The possible need for a tax could then be reassessed based on the extent to which

externalities are already being internalised through improved landfilling practices and higher costs.

With improved landfilling practices, the direct/financial costs of landfilling tend to increase, while

the external costs tend to fall (DEA, 2018b).

If it is then found that a landfill tax is still needed in order to further internalise external costs; such

a tax must be designed and implemented in accordance with the principles set out in the National

Pricing Strategy (DEA, 2016); and in such a way as to internalise externalities, rather than to raise

revenues. For example, the rate of the tax should be set in accordance with the value of the

externality, should be designed in a phased manner, and should be implemented together with



support for viable alternatives. Since, in the South African context, “the use of the revenue raised

through a landfill tax is likely to be controversial” (DEA, 2018b:52); revenues should preferably be

ring-fenced to support alternatives; e.g. through the provision of subsidies (see Section 4.3.8) or

infrastructure development grant funding (Section 4.3.11).

Setting an appropriate tax rate requires detailed information regarding the external costs associated

with landfilling, based on economic valuation studies. Estimates of household sensitivity to such

charges are also required. Finally, political will is also important, as no form of tax is likely to be

politically popular, particularly if it is poor households who are affected. However, as with product

taxes, this can be mitigated to a certain extent through transfers of various types (e.g. by reducing

the rates of other taxes faced by poor households) (Reschovsky and Stone, 1994:138).

4.2.7 Waste Infrastructure Development Fund

4.2.7.1 Mechanism

South Africa has adopted the principle of the waste hierarchy. However, in a context with significant

uncontrolled disposal (illegal dumping, use of ‘self-help’ or communal disposal, and non-compliant

and semi-compliant landfill sites), the first priority should arguably be to move from uncontrolled

disposal towards controlled disposal in well-operated, sanitary landfill sites; which should be seen

as the foundation of the waste hierarchy (see Figure 1, repeated here as Figure 6 for convenience)

(World Bank, 2019b). In other words, it is necessary to get the basics right first, before considering

implementation of a landfill tax for example, which would simply exacerbate illegal dumping.

Improving the state of landfills in South Africa would also increase the costs of landfilling, which

would in turn create incentives for moving towards alternatives higher up in the waste hierarchy,

potentially precluding the need for a landfill tax.

It is acknowledged that improving landfill infrastructure will require significant capital investment.

According to the World Bank (2019b: 8), “one common approach to developing waste infrastructure

is to develop a national ‘Waste Infrastructure Development Fund’ to which municipalities can apply

for capital support to improve infrastructure”. Such a fund needs to be carefully designed “to

ensure that its parameters and accessibility requirements are clearly defined. Administration of the

fund will need to be established and municipalities are likely to require technical support to develop

appropriate proposals for funding” (World Bank, 2019b: 8).



Figure 6: The waste hierarchy (Source: United Nations Environment Program, 2015).


Examples of countries with this type of funding mechanism include India (the Jawaharlal Nehru

National Urban Renewal Mission, JNNURM) and the UK (Waste Infrastructure Fund).

Of particular relevance to the South African context, “a national programme for

subsidising/financing SWM infrastructure can be a powerful way to incentivise local authorities to

tackle cost recovery issues if the degree of cost recovery is a criterion for financial support”. This

approach has been adopted in India, for example, under the Jawaharlal Nehru National Urban

Renewal Mission (JNNURM) programme. This programme provides finance for local authority

infrastructure, based on criteria such as the percentage of cost recovery, and the collection

efficiency of solid waste user charges. A benchmarking system is applied, which “helps with the

identification of local authority interventions worthy of financial support” (GIZ, 2015).






As such, the potential need for a dedicated fund for waste management infrastructure should be

considered (World Bank, 2019a, 2019b). However, in the case of funding for upgrading landfill



infrastructure, such a fund should ideally have conditions attached, to ensure that municipalities

implement the necessary waste management reforms in order to access such funding.

Conditional grants are grants that are provided by national government to provincial or local

government on condition that certain criteria are met; as opposed to unconditional grants, which

are provided with ‘no strings attached.’ In the case of conditional grants for solid waste

infrastructure, in particular landfills, conditions which could be attached to grants include the

following:

o Licensing of landfill sites

o Compliance with license conditions / Norms and Standards

o Application of full cost accounting principles

o Application of cost-reflective solid waste tariffs and landfill tipping fees

o Cost recovery for waste services

o Reporting to SAWIS

The intention of attaching such conditions to grants is to create incentives for municipalities to

ensure that these fundamental issues are addressed, in order to improve the state of waste

management; while also increasing the costs of landfilling to reflect best practice, ensuring that

tariffs reflect the full costs of disposal to landfill. In turn, this would create incentives to divert waste

away from landfilling, towards alternatives.

4.2.8 Education and awareness

In addition to funding (see Section 4.2.7), improving the state of landfill management in South Africa

will also require “significant capacity building at municipal level to ensure that there is the necessary

technical capacity to develop and operate landfill in accordance with National Norms and

Standards” (World Bank, 2019b: 8). In addition, there is a need for capacity building around full cost

accounting, in order to ensure that tariffs are set in such a way as to be reflective of the full costs

associated with landfill disposal. This capacity building could entail a “program of workshops and

training packages (ranging from short courses to tertiary education), which would be delivered in

close partnership with academic, research and trade institutions working in this space” (World Bank,

2019b: 8).

In addition, it was identified during Phase 1 of the study that waste generators do not tend to

associate with waste; or consider what happens to their waste once it has been collected (the “Not

In My Back Yard’ (NIMBY) problem). Instead, waste is simply seen as the municipality’s

responsibility. There is therefore a clear need for awareness raising among waste generators

regarding the impacts of the waste that they generate, particularly when it is landfilled rather than

re-used or recycled.



4.3 Instruments aimed at making alternatives more viable

4.3.1 Legislative changes

During the workshops conducted as part of Phase 1 of this study; a number of legislative obstacles

were identified, which acted as barriers to the access, recovery and use of waste materials; and

therefore to the diversion of waste from landfill and development of a secondary resources

economy (see Section 3.1). To recap, some of the obstacles identified were as follows:

The classification of materials as falling under the definition of waste makes beneficiation

of such waste streams difficult, as such activities are then classified as waste management

activities, for which a Waste Management License (WML) is required; which can be

cumbersome and costly to obtain

Municipal by-laws assign ownership of waste to municipalities; making it difficult for the

private sector to access such waste streams for beneficiation

Procurement rules under the MFMA make it difficult to set up contracts for a period

longer than three years, which is too short for private sector operators to recoup

investment in capital infrastructure

Procurement, compliance and regulatory obstacles and red tape make it a difficult and

lengthy process to establish public-private partnerships (PPPs).

It therefore stands to reason that legislative changes to remove these obstacles should be

prioritised; before considering the implementation of new policy instruments, which may

exacerbate the current fragmented and uncoordinated state of policy and legislation. Indeed,

removing these legislative barriers may preclude the need for implementation of additional policy

instruments to a certain extent.

4.3.2 Standards

Another set of factors behind the preference for landfilling over alternative options relates to the

lack of markets for recycled materials (see Section 3.5). A number of different types of standards

could be considered to facilitate the creation and/or development of these markets, such as:

Product standards mandating the use of recycled materials, or specifying a minimum

recycled content

Standards regarding recycled content labelling. Requiring producers to indicate the recycled

content of products would enable consumers to more easily identify and choose products

with a higher recycled content, which would in turn incentivise producers to increase the

recycled content of their products, thereby increasing demand for recycled materials.

Adapting building standards to accommodate/encourage use of recycled material (e.g. C&D

waste) in road building, construction, etc.

Quality standards to ensure the quality of products made from recycled materials.

Standards should be set “in such a way that secondary material can be integrated into a

product (for example, concrete made from recycled aggregates, plastic made from recycled



polymers), and that product would still meet the requirements that it would need to meet

if virgin materials were used” (DEA, 2018b: 42-43).

While the standards referred to above primarily address the demand side (i.e., they aim to facilitate

the development of markets for recycled materials); standards can also be put in place to address

the supply side, in terms of increasing the re-usability and/or recyclability of products, which would

make re-use or recycling more viable, and therefore increase the likelihood that they would be re-

used or recycled rather than disposed at landfill. An example of such a standard is the plastic bag

minimum thickness standard (DEA, 2018b). In addition, standards regarding product labelling,

providing information on how and where products can be recycled, would also increase the

likelihood that products would be recycled rather than landfilled.

4.3.3 Procurement policies

Another important way in which markets can be created or developed is through government’s own

procurement activities. It was suggested during the Phase 1 workshops that government could help

to create markets for recycled materials by adapting their own procurement policies to favour

products made from recycled materials over those made from virgin materials. Examples of such

procurement policies, identified both during the workshops and in international literature, include

the following:

Procurement policies mandating the use of recycled products: Government can create

markets for recycled materials; for example, by using C&D waste in building materials, low

cost housing/furniture, school desks/benches, park equipment, etc.

Preferential pricing - favouring products with more recycled content. For example,

government can extend preferential price treatment in its procurement practices to

suppliers using recycled content (Inter-American Development Bank, 2003).

Set-asides - reserving a certain proportion of expenditure for recycled products (World

Bank, 2016)

Off-take agreements - provide a guaranteed market for recycled materials; or a guaranteed

income from a recycling facility (United Nations Environment Program, 2005).

4.3.4 Elimination of perverse subsidies

Subsidies on virgin materials can be seen as an implicit ‘tax’ on recycled materials; since they create

perverse incentives for the use of virgin materials rather than recycled materials. Eliminating

subsidies on virgin materials would therefore contribute towards making recycled materials more

competitive, and thereby grow the market for recycled materials.

For example, the National Recycling Coalition (1999) identified nine separate subsidies in the USA,

costing between $3 to $5 billion per year, which artificially lower the price of virgin materials (as

well as landfilling), and thereby negatively impact on recycling. It was recommended that these

subsidies be eliminated. However, it was also noted that “while the elimination of these subsidies

is an important first step, their elimination alone will not guarantee an improvement in the market

demand and prices paid for recovered materials” National Recycling Coalition (1999:i). In other



words, elimination of subsidies on virgin materials should form part of a complementary package of

instruments.

4.3.5 Virgin material taxes

Generally speaking, market prices for virgin materials tend to be lower than those for recycled

materials (DEA, 2018b). This means that recycled materials are unable to compete with virgin

materials, which inhibits the development of markets for recycled materials.

In principle, taxes on virgin materials would help recycled materials to compete, by increasing the

prices of virgin materials relative to recycled materials; thereby encouraging the use of recycled

materials, and the development of markets for such materials (DEA, 2018b).

A common example of virgin material taxes are those applied on construction aggregates, such as

sand and gravel. A number of European countries have taxes on virgin aggregates, including the UK,

Sweden and Denmark (Söderholm, 2011). The taxes on virgin aggregates in these three countries

have been shown to reduce the use of virgin aggregates and encourage recycled materials to an

extent, although the evidence is mixed (Söderholm, 2011). Since the cost of aggregate materials

tends to be low relative to overall construction costs, the price elasticity of demand for aggregates

(i.e. the change in demand in response to changes in price) tends to be low. As such, substitution

from the use of virgin to recycled aggregates tends to be limited (Söderholm, 2011). Furthermore,

“generators of recycled materials have few incentives to enhance their waste sorting activities in

the presence of a tax on virgin materials, and unless additional policies to increase the supply of

such materials are implemented, supply will not increase much even in the presence of a high

demand” (Söderholm, 2011:911). In other words, it is argued that a complementary suite of policies

is needed to stimulate both the demand and supply side of the market for recycled materials.

4.3.6 Advance recycling fee

Similarly to product taxes, advance recycling fees (ARFs) are fees levied on either the producer or

consumer of a product; however, they have the specific objective of raising revenue to cover the

cost of recycling (DEA, 2018). In other words, an ARF is essentially a tax assessed on product sales,

revenues from which are used to cover recycling costs (Walls, 2006; Nnorom and Osibanjo, 2008).

ARFs “may be visible to the consumer… as a separate line item on the bill, similar to sales tax – or

they can be assessed upstream on producers and later incorporated into the product price” (Walls,

2006:3).

Internationally, ARFs are most commonly levied on electronic goods, which tend to be complex and

expensive to separate into their component materials for recycling. ARFs serve to “adjust the

recycling market to make recycling of a particular material or product more viable” (DEA, 2018b:53).

The incentives provided by an ARF depend largely on what is done with the revenues (Walls, 2006).

As with many of the instruments discussed in this report, ARFs tend to be most effective as part of

a package of complementary instruments (DEA, 2018b). For example, as with Extended Producer

Responsibility (EPR) fees (see Section 4.3.14), revenues from ARFs can be used to fund financial



incentives (payments) to consumers, collectors or processors per unit or on a weight basis of

material returned, collected or recycled, thus increasing the quantity supplied. This combined

ARF/incentive system is essentially a type of deposit-refund scheme, where the ARF acts as a

‘deposit’ at the point of sale, while the payment acts as a refund that is paid upon return of the used

product for recycling.

However, ARFs require that revenues can be ring-fenced to fund recycling activities. As such, in a

context where environmental tax revenues are not ring-fenced, as in South Africa, ARFs would need

to be implemented within an industry-managed EPR system, in which the Producer Responsibility

Organisation (PRO) would be responsible for ensuring that revenues are allocated towards

organisations undertaking recycling.

4.3.7 Deposit-refund schemes

4.3.7.1 Mechanism

Deposit-refund schemes (or deposit-refund systems) are essentially a combination of a product tax

and a subsidy. An initial deposit is paid upon the purchase of a product; acting as a product tax. The

deposit is refunded when the used product (or packaging) is returned, which acts like a subsidy,

creating incentives to return the product or packaging for re-use or recycling, rather than having it

collected for disposal.

The rationale behind deposit-refund schemes is that, in principle, they provide an optimal

combination of instruments which is both self-funding (revenues raised through the deposit are

used to fund the payment of refunds), and which creates appropriate incentives both for reducing

waste generation and for recycling. The deposit that is paid on the product should ideally reflect the

full social costs associated with its disposal, including environmental externalities. This would in

theory reduce demand for the product, thereby reducing waste generation. At the same time, the

refund element creates incentives for the product to be returned for recycling (Calcott and Walls,

2005, Pearce and Turner, 1993; Forum for Economics and the Environment, 2002).

Ideally, the value of the refund should equal that of the deposit, to ensure that consumers end up

no worse off than before (Pearce and Turner, 1993); although in some systems only some fraction

of the deposit is returned, with the remainder used to finance the system.


Deposit-refund schemes (DRSs) are most commonly applied to refillable/recyclable beverage

containers (including glass and plastic bottles and aluminium cans), but their application has also

been extended to tyres, cars, and batteries (particularly car batteries). They are common in both

developed and developing countries, including South Africa, where voluntary DRSs have been

applied successfully to glass bottles, car batteries and waste oils (DEA, 2018b).

Internationally, they have been used in Austria (for refillable plastic beverage containers), Germany

(plastic beverage containers and other packaging), the Netherlands (products containing aluminium



and polyvinyl chlorides), Portugal (metal cans), Sweden (aluminium cans; cars), Norway (cars), and

the USA (beverage containers); as well as in Bangladesh, Brazil, Chile, China, Colombia, Ecuador,

Jamaica, Japan, Mexico, the Philippines, Taiwan, and Venezuela (Pearce and Turner, 1993; Forum

for Economics and the Environment, 2002).

Importantly to note, most DRSs are voluntary, although “compulsory systems do exist for some

special hazardous wastes” (Inter-American Development Bank, 2003:20); for example, car batteries

in Mexico. Legislation enforcing a compulsory deposit-refund system tends to meet with industry

resistance. For example, the German Einwegpfand system for single-use beverage containers met

with resistance as a result of the high administrative burden placed on the impacted industries (DEA,

2018b). In addition, the system was found to have a negligible impact on the disposal patterns of

consumers (DEA, 2018b).

DRSs on refillable or recyclable beverage containers are often implemented in combination with

product taxes on non-refillable/non-recyclable beverage containers, to encourage use (and return)

of the former, and discourage use of the latter. In other words, recyclable or reusable products are

subject to a deposit-refund (and exempt from the product charge), in order to encourage use (and

appropriate disposal) of these products over non-recyclable/non-reusable products, which are

themselves subject to a product charge in order to discourage their use (Pearce and Turner,

1993:67).

For example, in addition to a deposit-refund on refillable beverage containers, “Belgium additionally

created an exemption ruling that beverage producers that do not have refillable containers would

have to pay an eco-tax” (Inter-American Development Bank, 2003:20-21). Canada, Denmark,

Finland and Norway have all used product charges on non-refillable beverage containers in

combination with a deposit-refund on refillable containers to discourage use of the former and

encourage use and return of the latter (Pearce and Turner, 1993:67). Revenues obtained from the

product charges are often used to finance such deposit-refund systems, e.g. in Finland and some

states in the USA (United Nations Environment Program, 2005).

In general, deposit-refund systems seem to have been effective in increasing recycling and in

reducing disposal and litter clean-up costs. For example, in the late 1980s, Denmark had a recycling

rate for recyclable beverage containers of 97%, largely attributed to its deposit-refund system. By

2001, ”reports showed that beverages in local refillable bottles made up 99% of the Danish market”

(Inter-American Development Bank, 2003:21). Similarly, in the USA, where many states have a

deposit-refund system for carbonated beverage containers (soft drinks and beer), 80% to 95% of

containers affected by the system are returned for recycling. They have also been successful in

Finland, where 90% of affected containers are returned (United Nations Environment Program,

2005).

Norway implemented a DRS for the hulks of cars and vans in 1978, with higher refunds paid for

hulks returned to officially designated sites, stimulating a return rate of over 90% in the mid-1990s.

Revenues are used to fund refunds as well as collection, transportation, and dismantling facilities.

Similarly, some states in the USA (e.g. California) impose a mandatory deposit on the sale of car



batteries, which is “waived or returned if a used automotive battery is brought to the store” (United

Nations Environment Program, 2005:445).

However, the effectiveness of deposit-refund systems in stimulating recycling has varied from case

to case and has proven difficult to determine accurately. For example, “the recycling rates of

aluminium beverage cans range from 40 per cent to 90 percent among developed countries. The

level of the initial product tax or charge, the level of infrastructure for collection and recycling, and

the general public ethic towards the environment are all factors which influence the success of the

programme” (Forum for Economics and the Environment, 2002:239).

They have also imposed costs on society, for example, in the form of increased product prices and

increased handling, storage and transport costs. Thus, evidence regarding their overall societal

effect is mixed, with most cost-benefit studies unable to demonstrate unambiguous net benefits

(Pearce and Turner, 1993). For example, according to Pearce and Turner (1993:78), “superficial

evidence drawn from schemes that have actually been implemented (most for beverage containers)

suggests that DRSs may impose net costs on society. Actual schemes have led to only relatively small

reductions in the volume and cost of waste disposal, and litter reduction cost savings have usually

been experienced, but their magnitude has varied quite widely, and such schemes have also been

expensive to operate and have pushed up product prices.”

In fact, households have had “significant costs imposed on them in the form of lost consumer

surplus as product prices have risen above the level of the deposit set” (Pearce and Turner,

1993:80). For example, in Michigan’s DRS for beer and soft-drink containers, “net reuse/recycling

value of aluminium cans turned out to be less than the net reduction in social benefits. The prices

of beverages in both cans and bottles also rose by up to 5c per filling and overall consumption fell

(Pearce and Turner, 1993:83); resulting in an overall reduction in consumer surplus.

There is also “a lack of quantitative assessments in which the costs of deposit-refund systems are

compared to the costs of alternatives that have an equally beneficial environmental impact.

Nonetheless, it can be assumed that, in some cases, the costs of household waste collection,

transport, and incineration or dumping exceed the costs of the deposit-refund system” (United

Nations Environment Program, 2005:445).

Finally, there is also contrasting evidence regarding the sensitivity of return rates to the size of the

deposit. For example, in Sweden, “doubling the deposit charged for aluminium beer cans increased

the quantity of cans returned from 70% to more than 80%” (United Nations Environment Program,

2005:445). However, “a much more important factor in this context has been the number,

knowledge and convenience of container return points” (Pearce and Turner, 1993:81). For example,

in Michigan, “the critical issue in deciding whether the DRS was economically efficient was whether

the benefits to individuals in the form of less litter were worth the return inconvenience costs

imposed on consumers” (Pearce and Turner, 1993:82).




By providing a tangible financial reward for the return of recyclable products, deposit-refund

systems have been shown to stimulate recycling (or at least safe disposal) and discourage littering

(United Nations Environment Program, 2005); at least in the case of the fairly limited range of

products to which they can be applied (Inter-American Development Bank, 2003). Compared to

product taxes, which do not generally provide incentives to stimulate recycling, they are also fairer

on households, who are able to offset the price increase associated with the deposit by returning

the product and claiming a refund. They may also be less regressive, to the extent that poorer

households are more likely to return used products (Pearce and Turner, 1993). Compared to

quantity-based collection fees, they have similar effects on the incentives for waste reduction and

recycling, but have the advantage that they don’t create incentives for illegal disposal, and are more

“efficient in terms of administration, in that monitoring or other involvement by authorities is

usually not required” (United Nations Environment Program, 2005:445). Indeed, they could be left

almost entirely to the market, with government merely monitoring the process. Finally, they have

been shown to be more cost-effective than other policy instruments (Choe and Fraser, 1998).

However, as compared to product and input taxes, deposit-refund schemes are slightly more

administratively demanding, implying higher transaction costs; thus the net effect on society may

be negative (Pearce and Turner, 1993; Choe and Fraser, 1998). Finally, they are “only applicable to

a limited class of wastes… [i.e.] to certain materials in the waste stream for which recycling and

reuse possibilities are significant” (Choe and Fraser, 1998:284-5). In particular, they are only

applicable to waste types that “maintain their integrity after use and are readily recyclable” (Inter-

American Development Bank, 2003:20); such as beverage containers. They are not appropriate for

materials that cannot be easily recycled or reused, or “that simply need to be disposed of and for

which high transaction costs are incurred in implementation” (Choe and Fraser, 1998:286). The

items in question should also be easy and convenient to clean and return, such as beverage

containers. As such, there may be limited scope for DRSs to be expanded to other products in South

Africa, since they are already applied to a number of products that meet the requirements for such

a system (DEA, 2018b).

Thus, the merits of implementing a deposit-refund scheme must be considered on a case-by-case

basis. For example, the UK is a notable example of a country that doesn’t rely heavily on deposit-

refund schemes. Studies there have found that “the most promising application for [deposit-refund

schemes] might well be in the control and management of the more hazardous components of MSW

[such as batteries and used motor oil], where an assured system of ‘safe’ disposal is a high priority

objective” (Pearce and Turner, 1993:89; Pearce and Turner, 1994). Indeed, a DRS can provide

assurance “that more material will be disposed of through an authorised outlet” (Pearce and Turner,

1993:88). However, deposit-refund schemes tend to be voluntary (so as to fit with the concept of

consumer convenience); whereas for particularly hazardous waste products, compulsory return

may be more appropriate, as is the case for car batteries in Mexico (Inter-American Development

Bank, 2003:20).

Factors influencing the success of a DRS include “the level of the initial [deposit], the level of

infrastructure for collection and recycling, and the general public ethic towards the environment”



(Forum for Economics and the Environment, 2002:239). The level of infrastructure affects the

convenience of making returns. However, “inconvenience costs to consumers may well fall over

time as individuals adjust to the returnable system. Government regulation/legislation could

mandate the required number and type of returning points, which in turn could boost trippage (i.e.

return) rates” (Pearce and Turner, 1993:81). However, the more return points, “the higher will be

the overall system costs for handling, storage and transport of returns” (Pearce and Turner,

1993:81). In the South African case, however, deposit-refund schemes may provide a sufficient

incentive to stimulate increased collection and recovery by the informal sector, even if the refunds

are not high enough to encourage consumers themselves to return products (DEA, 2018b).

Finally, a DRS requires a viable recycling industry comprising “careful sorting, segregated collection,

and development of a strong network of industries to reuse the materials” (Inter-American

Development Bank, 2003:26). They will also be more economically viable and successful if there is

“a significant market for the recycling of wastes, including their import and export. In those

countries where such [markets] have not been well developed, a more detailed analysis is needed

to identify the measures that would allow the stimulation of such markets” (Inter-American

Development Bank, 2003:29).

4.3.8 Subsidies

Subsidies “can be used to advantage in most phases of solid waste management” (United Nations

Environment Program, 2005:445). For example, subsidies can be paid to various actors along the

chain in order to stimulate improved design for recycling and/or use of recycled inputs; to provide

incentives for separation, collection, and/or recovery of waste; and/or to increase the viability of

recycling and other alternative waste treatment options. Specifically, subsidies could be paid to:

Producers, to provide incentives to design products for recycling / recyclability; or to use

recycled materials/inputs

Waste generators, e.g. households, to provide incentives to separate their waste, e.g.

through separate collection of recyclables, drop-off centres, ‘reverse vending machines’,

and subsidised composting bins (e.g. in the UK and Australia)

Collectors (either waste collection authorities, as in the UK; private sector companies; or

informal collectors), in order to provide incentives to collect recyclable materials

Recyclers, in order to “provide financial or other support to increase the viability of waste

treatment options with lower environmental impacts than the default option” (DEA, 2018b

:9).

4.3.8.1 Mechanism

In terms of subsidies to waste generators, households could in principle receive a payment per item

returned for recycling, related to the item’s recycling value or (preferably) degree of environmental

impact associated with disposal. This would have the effect of reducing the costs to the household

of separating waste, thus providing an incentive to increase the separation of waste for recycling.

However, in the absence of kerbside collection of recyclables, payments for recycling require that

households return recyclable items to central drop-off centres; which involves transaction costs on



the part of the household (time, inconvenience and travel costs involved in making such returns4).

These vary across households, and counteract the payments received, increasing the cost to the

household. Thus, maintaining the assumption that households have two options for disposing of

the waste they generate (collection for landfill disposal, and recycling at central drop-off points5),

households can choose either to have their waste collected for disposal, which is convenient but

does not provide payment (and may involve costs, if quantity-based collection fees are also

implemented); or to return their waste for recycling at drop-off centres, for which payment is

available, but which involves transaction costs (Calcott and Walls, 2005).

If these transaction costs exceed the payment received by households, or if there is a lack of

awareness regarding the existence or location of drop-off points, such payments will not be

effective in stimulating recycling. Since different items have different recycling values, and thus

involve different payments to households, the extent to which returns to drop-off centres are viable

for the household depends on the type of material. Return of high-value items may entitle the

household to payments which outweigh any transaction costs, such that recycling of these items

will increase. For items with a low recycling value, however, transaction costs may outweigh

payment received, and households will have no incentive to recycle, and will instead opt to have

their waste collected for disposal to landfill. Thus, incentives for waste generators should be

implemented in combination with other instruments, such as quantity-based disposal fees or

kerbside collection of recyclables, which provide an incentive for households to recycle even low-

value items6 (Calcott and Walls, 2005).

The level of recycling is affected not only by the incentives facing households, but those facing the

individuals and businesses involved along the entire value chain; such as suppliers of products with

recyclable content, collectors, recyclers, and users of recycled materials; who typically don’t realise

the full social benefits of their activities. As such, another type of subsidy is aimed at changing the

incentives faced by these individuals or businesses, such that they are able to internalise the

external benefits of their activities. These instruments are therefore aimed at increasing the level

of recycling by making it more financially viable to produce products with recyclable content, to

collect recyclables, to establish new recycling companies, to expand existing recycling activity, or to

produce products using recycled materials.

4 Transaction costs also depend on employment status and income, which determine the ‘opportunity costs’ of the time and effort involved. The poor and unemployed may have more time available and find that payments received are worth the effort; whereas for middle and upper-class households, the small payment received does not warrant the time involved. Environmental awareness therefore becomes important. 5 Payments for returns don’t create incentives for illegal dumping, so we can again ignore this here as a disposal option. Furthermore, in some countries, such as the USA and UK, kerbside collection of recyclables is also available as an option, often in combination with collection charges (as in the USA); which provides a dual incentive to increase recycling and decrease final disposal to landfill. 6 The advantage of kerbside collection as an additional recycling option is that households still have an incentive to recycle (rather than have waste collected as trash) even for those items with low recycling value (low payment). However, kerbside collection of recyclables is rare in developing countries; and requires that collection routes are covered twice (once for municipal waste collection and once for collection of recyclables), implying additional financial and environmental costs associated with road transport.



For example, the UK introduced a recycling credit scheme in 1992, whereby savings in collection

and disposal (landfill) costs as a result of increased recycling are passed on from disposal authorities

to waste collection authorities or other organisations undertaking collection activities. The ultimate

objective is “to move waste disposal up the waste hierarchy, thus supporting sustainable waste

management” (Powell and Craighill, 1996:2).

In the South African context, where informal waste pickers play a significant role in the collection of

recyclables, one potential mechanism that has been suggested is that of paying “top-up” incentives

to informal waste pickers, funded by EPR schemes (analogous to payments made to private

collectors for kerbside collection of recyclables in developed countries) (Godfrey, 2019). These could

take the form of an additional amount paid per kg of material collected, over-and-above the market

value of the materials. The aim of such payments would be to incentivise increased collection

(across a wider range of materials, rather than only cherry-picking the highest-value materials),

encourage pickers to sell recyclables directly to EPR-linked buy-back centres (Godfrey, 2019), and

compensate them for their activities, particularly given their contribution towards the recycling

industry in South Africa, as well as the cost savings that they generate for municipalities through

airspace savings.

In this review, we were not able to find examples in other developing countries of top-up incentives

being paid per kg of material brought by informal collectors to buy-back centres. Instead, financial

support for waste pickers tends to take other forms, such as payments for waste pickers’ labour,

and/or compensation through subsidies; typically through formal integration in collection within

source separation programmes (Dias and Samson, 2016). In some parts of Brazil, waste

organisations receive a subsidy on the rental of warehouses (Perrupato-Stahl, 2016). Nevertheless,

it is a concept that is certainly worth exploring further; while other types of incentives for informal

collectors that have proved effective in other developing countries should also be investigated.


Internationally, a “wide range of subsidy-based instruments are used to incentivise movement up

the waste hierarchy. Examples of such subsidies are the financial support of recycling activities, tax

rebates for recycling, preferential loans for the recycling industry, preferential rates on electricity

generated from waste, the incentivised use of secondary materials, or the support of research into

recycling opportunities. This includes the subsidisation of products with lower levels of non-

recyclable waste or a higher percentage of bio-degradable material” (DEA, 2018b :56).

In practice, subsidies to households for separation of waste for recycling are relatively uncommon,

at least on their own. Instead, such payments are often combined with an initial tax on the product,

in the form of a deposit-refund scheme, as discussed in Section 4.3.7.

However, subsidies to collectors and recyclers are somewhat more common. For example, the UK

introduced a recycling credit scheme in 1992, prior to implementation of the landfill tax, whereby

savings in collection and disposal costs as a result of increased recycling are passed on from disposal



authorities to any local authority or organisation undertaking collection and sorting of recyclables7.

In other words, the savings in terms of avoided disposal costs are passed on to the

collectors/recyclers who have diverted waste from landfill. The scheme aims to “incentivise

recycling of household waste by local authorities and by third parties (e.g. community groups,

businesses and other organisations carrying out recycling activity)” (Department for Environment

Food and Rural Affairs, 2006b:1); by making available to recyclers “the savings in disposal and

collection costs which result from recycling household waste” (Department for Environment Food

and Rural Affairs, 2006b:1).

Within the scheme, “credits are calculated as a percentage of the collection and disposal avoidance

costs and thus ensure some income for recycling businesses, even when the market demand for

recyclables is low” (Inter-American Development Bank, 2003:16). Currently, the scheme operates

in conjunction with other instruments, including the landfill tax. However, there has been evidence

that “the design of the scheme could inhibit effective and sustainable waste management”

(Department for Environment Food and Rural Affairs, 2006b:1). For example, as discussed above,

“credit rates set are not equivalent to the social costs of waste disposal and therefore do not fulfil

a strict economic efficiency criterion” (Turner et al., 1996:14). However, an advantage of the

scheme is that it is “not a drain on the central government budget, as it is simply a transfer payment

between different tiers of local government and third parties8” (Turner et al., 1996:28).

In terms of effectiveness, a 1994 review of the scheme was “unable to identify any statistically

significant impact that recycling credits might have had on the amount of recycling taking place

during the first two years of operation of the scheme” (Turner et al., 1996:29); although this survey

took place before credits were increased from half to full long-run marginal costs. Sixty percent of

waste collection and disposal authorities interviewed suggested that “recycling levels would have

been lower without the recycling credits scheme and 71% thought the increase to full marginal costs

would increase the amount of recycling” (Turner et al., 1996:29).

Note however that recycling credits are not true environmental subsidies, as the full value of the

external benefits of recycling are not internalised. Instead, the credits “correct the market failure

of the waste management system by reflecting the financial savings achieved by recycling” (Turner

et al., 1996:29); in terms of reduced disposal costs.

In South Africa, there are currently no subsidies specifically aimed at reducing waste to landfill.

However, “municipalities often provide implicit subsidisation to formal and informal recyclers and

composting operations, through the provision of land and equipment and the supply of material

free of charge. Government also assists with the funding of feasibility studies (even for landfills),

funding the capital cost for Materials Recovery Facilities (MRFs), and providing soft loans, but this

is done on an ad hoc basis” (DEA, 2018b: 56). However, it should be noted that subsidies provided

by “national government to local government in the form of capital grants, if used for landfilling,

7 Recycling credits will therefore not be effective in cases where disposal authorities are one and the same as those responsible for collection and sorting of recyclables, as is the case with many municipalities in SA. 8 See previous note



could be argued as a perverse subsidy that encourages the continued use of landfills” (DEA, 2018b:

56).


It is clear from the above that subsidies could potentially be applied at a number of different points

along the value chain. As such, when considering subsidies, it is important to identify where in the

value chain they could be applied in order to have the “largest impact on diverting waste from

landfill” (DEA, 2018b: 56). In addition, since subsidies “are likely to be provided to the private sector,

the distributional effects and impacts on competitiveness need to be carefully assessed. Subsidies

should only be provided where a market would otherwise not exist and where access to the subsidy

is not privileged“ (DEA, 2018b: 56).

Payments to households for return of recyclables requires that the necessary infrastructure (such

as drop-off or buy-back centres) are in place. They also require awareness on the part of households

as to the existence and location of drop-off centres, as well as environmental awareness, since

payments alone will not be sufficient to encourage return by households with high transaction costs.

These services are likely to require the involvement of private companies, in which case well-

functioning recycling markets are required. Recycling credit schemes, on the other hand, require

little additional infrastructure, but some degree of monitoring and enforcement of payments from

waste disposal authorities to recycling companies.

In addition, a system of payments to households for recycling is likely to be costly, because it

“requires recyclers to determine how valuable products are for recycling and pay a price based on

that value. Consumers may also incur costs in making items available to recyclers” (Calcott and

Walls, 2005:288-9). However, the problem of funding can be mitigated to a certain extent if

subsidies are ‘self-funding,’ as is the case with the UK recycling credit scheme; or if they are

implemented in conjunction with user charges or product taxes (as in a deposit-refund system).

Indeed, payments for recycling, implemented in isolation from other, complementary policies, are

unlikely to be effective, particularly for low-value materials for which the payment received is

insufficient to justify the transaction costs involved in recycling. For such materials, the

inconvenience associated with making returns to appropriate drop-off centres is likely to outweigh

any potential payment, such that households are likely to opt for the convenience of kerbside

collection of trash for disposal. Thus, a complementary policy is required in conjunction with

subsidies that provides an incentive to recycle even low-value materials. For example, subsidies to

households could be implemented in conjunction with (Calcott and Walls, 2005):

1. kerbside collection of recyclables, which makes recycling as convenient as the normal

collection of trash destined for landfill; but which requires additional resources and capacity

in the solid waste sector, which is unavailable in many developing countries (indeed, this

service is available in only a few developed countries)

2. quantity-based collection charges, which increase the costs associated with having waste

collected as trash relative to recycling; but which may provide an incentive for illegal



disposal. However, if implemented in conjunction with recycling payments, the overall effect

on incentives may be to encourage recycling rather than either legal or illegal disposal.

3. product taxes, which increase the costs associated with waste generation. This particular

combination (deposit-refund system) is discussed in Section 4.3.7.

Furthermore, payments based on recycling value fail to fully internalise environmental externalities

and therefore do not ensure optimal recycling of environmentally damaging materials. Instead,

payments for different types of materials should be based on the associated environmental

damages; although this requires the quantification of environmental damages in monetary terms.

A final problem with subsidies is that “once initiated, they tend to become institutionalised with the

recipients claiming financial harm if the support is reduced or stopped” (Forum for Economics and

the Environment, 2002:240). For example, the problem with subsidies to recycling companies is

often that the companies involved are not financially viable after the subsidy is removed, and the

policy therefore fails. Possible reasons include the lack of a stable market for recyclables, or

significant price differentials between materials. The challenge is therefore to ensure that these

companies remain sustainable, i.e., that recycling remains financially viable, even after the subsidy

is removed. There is therefore a need to ensure that distortions in the recycling market are

permanently removed, so that such a market can ensure an optimal level of recycling, without

ongoing government support.

4.3.9 Tax concessions / rebates

An alternative to direct, explicit subsidies as discussed in the previous sub-section, is the provision

of implicit subsidies in the form of various types of tax concessions, such as tax rebates or

exemptions.

For example, tax reductions could be provided to “incentivise waste management

behaviour/activities with lower environmental impact than the default option” (DEA, 2018b: 9). In

other words, preferential tax treatment could be provided to businesses for improved waste

management practices or initiatives, as is done in the USA and Poland (United Nations Environment

Program, 2005).

Another option could be to provide rebates on waste collection/disposal charges for activities that

divert waste from landfill, based on the avoided costs.

Finally, tax rebates or tax credits could be provided to industries for using recycled materials as an

input in their products (United Nations Environment Program, 2005); in order to incentivise an

increased demand for recycled materials.

4.3.10 Tradable recycling obligations

Similar to other ‘cap-and-trade’ type schemes, tradable recycling obligations are an approach to

achieving an overall target for recycling, at the lowest overall cost. Specifically, a country’s overall

recycling target (in terms of tonnages to be recycled/recovered) can be allocated among businesses,



placing an obligation on each business to recycle or recover a certain quantity of materials; after

which businesses can be allowed to trade obligations among each other, thereby ensuring that

recycling is done primarily by organisations that can do so most cost-effectively.

This approach is followed in the United Kingdom as a way of achieving the country’s recycling target

set out in the EU Packaging Directive. Specifically, “the recovery and recycling targets to be met by

the UK are cross-referenced at the start of the year with the market share (measured in the amount

of packaging handled) of each UK business, giving each a quantity, in tonnes, that they must recycle

or recover – and if every obligated company in the UK recycles their allocated “obligation”, the

overall UK target will be met” (James Ross Consulting, 2010: 1).

Businesses are then able to meet their recycling targets “through the purchase of Packaging Waste

Recovery Notes (PRNs). These are tradable recycling certificates generated by government-

accredited recycling companies” (James Ross Consulting, 2010: 1), which provide evidence that a

certain quantity of packaging material has been recycled.

The purchase price of the PRNs “depend on the material it represents and the market. For example,

if there is a shortage of plastic recycling to meet an increased recycling target then plastic PRNs will

be in short supply. The plastic PRN price will therefore increase and, as a result, more money will be

available to plastic reprocessors to invest in collection and recycling infrastructure” (James Ross

Consulting, 2010: 1).

However, the effectiveness of the PRN system is contested. The scheme has allowed the UK to meet

its recycling targets at minimal cost to producers, and is therefore favoured by the packaging

industry in terms of cost-effectiveness (Harrabin, 2018; Peake, 2018). However, it has been criticised

for passing the bulk of the financial responsibility for recycling onto local authorities (and,

ultimately, taxpayers); for not creating incentives for improved design and innovation; and for not

allowing current recycling targets to be exceeded (Peake, 2018; Easen, 2019). As such, there have

been calls for the scheme to be replaced with a deposit-refund system, although industry remains

in favour of the PRN system (Harrabin, 2018).

4.3.11 Infrastructure Development Funding / Grants

One of the key reasons identified in Phase 1 for the dominance of landfilling as a waste management

option was the lack of infrastructure for recovery and recycling of waste.

As such, there is a clear need for national government to provide access to funding for municipalities

for the development of infrastructure, for example in the form of an Infrastructure Development

Fund (World Bank, 2019b). For example, such funding could be used to develop municipal

infrastructure such as:

Composting and/or anaerobic digestion (AD) facilities for the treatment of organic waste

Materials recovery facilities (MRFs) for the sorting and recovery of recyclable waste

Buy-back centres, particularly in formal neighbourhoods (or, mobile buy-back centres), for

the collection of recyclable materials collected by communities and informal waste pickers.



Locating buy-back centres closer to where the waste is generated will enable informal

collectors to work more efficiently and therefore recover more materials per day.

Drop-off centres for the collection of recyclable waste and organic waste streams not

typically collected by the municipality.

Grants could also be provided in order to create financial incentives for the improvement of various

aspects of solid waste management. Grants could be provided not only to municipalities, but also

for the establishment of recycling businesses, thereby contributing toward the development of

small businesses.

Finally, “the market for recyclable materials can be stabilised through: price supports for the

establishment of materials banks… [or the provision of] investment grants, accelerated

depreciation, and soft loans designed to encourage private enterprises to implement resource

recovery activities” (United Nations Environment Program, 2005:446).

4.3.12 Partnerships

Another key issue identified during Phase 1 of the study, and by the World Bank (2019b), is the lack

of collaboration and partnerships among the various role players within the waste sector in South

Africa. In particular, there is a lack of collaboration and coordination between government and

industry, between municipalities and private sector waste management companies, and between

the formal and informal sectors.

Some recommendations in this regard that have emerged in this study include the following:

All stakeholders (both formal and informal, public and private sector roleplayers) should be

involved in policy / decision making

Public-private partnerships between municipalities and the private sector - municipalities

don’t necessarily have the funding to develop infrastructure, whereas the private sector

relies on municipality to access waste; so partnerships are required. In addition, it was

suggested that industry bodies should collaborate with SALGA as the representative of all

municipalities

Municipalities should seek to improve integration of the informal sector within the formal

waste management system, in order to reduce the costs associated with collecting

recyclables, while also maintaining the livelihoods of informal pickers.

4.3.13 Education and awareness

A further issue identified in Phase 1 was the lack of awareness among waste generators around

how/what to recycle, etc. Previous studies have also indicated a low level of awareness of and

participation in separation at source programmes by households. There is therefore a clear need for

awareness raising and information campaigns for waste generators in terms of what types of

material can be recycled, how their recyclables should be separated, where it can be delivered to,

how to participate in separation at source programmes, etc. In addition, waste generators should



be educated around how organic waste can be composted, to develop community-led composting

initiatives (World Bank, 2019b), etc.

In addition, a need was identified for awareness campaigns targeted at both producers and

consumers, aimed at changing perceptions around the quality of recycled inputs (or of products

with recycled content) relative to those from virgin sources.

Finally, the World Bank (2019b) identified a need for training and development of waste pickers;

e.g. mentoring waste pickers to move up the value chain, encouraging them to organise themselves,

etc.

4.3.14 Extended Producer Responsibility

4.3.14.1 Mechanism

Extended producer responsibility (EPR) is a policy approach, rather than a specific policy instrument,

in which the responsibility for a product’s end-of-life impacts is placed on producers. An EPR system

could comprise of a combination of various types of instruments, including EPR fees (or PRO fees),

advance recycling fees (ARFs), product take-back schemes/mandates, deposit-refund schemes, etc.

(see Table 6).

The aim of an EPR scheme is to “provide incentives for producers to make design changes to

products that would reduce waste management costs. Those changes should include improving

product recyclability and reusability, reducing material usage and downsizing products, and

engaging in a host of other so-called “design for environment” (DfE) activities.” (OECD, 2006: 4).

Table 6: Policy instruments under the EPR umbrella (adapted from Widmer et al., 2005; Nnorom and Osibanjo,

2008)

Category Examples

Regulatory instruments Take-back programs (mandatory or voluntary), including the provision of

infrastructure; reuse and recycling targets; minimum product standards;

prohibitions of certain hazardous materials or products; disposal bans;

mandated recovery/recycling obligations

Economic instruments Product taxes, input/material levies, virgin material taxes, EPR fees, ARFs,

collection fees, disposal fees, deposit-refund schemes, subsidies, tax/subsidy

combinations

Information instruments Environmental reports; environmental labelling; information provision to

consumers, collectors, recyclers, etc. through education and awareness-raising

campaigns


The concept of extended producer responsibility was originally conceived and applied to the

management of packaging waste in countries such as Sweden, Taiwan and Germany (e.g. the 1991

German Packaging Ordinance) in the late 1980s and early 1990s (Wilson, 1996; Walls, 2006). It has



since been extended to the management of waste electrical and electronic equipment (WEEE) in

the EU (through the 2002 EU WEEE directive), North America and East Asia; and to a range of other

waste streams, inluding used oil in Western Canada and vehicles in Japan (Widmer et al., 2005;

Walls, 2006; Nnorom and Osibanjo, 2008).

EPR systems are also applied in Korea, covering a range of products, including tyres, lubricants,

various electronic products, fluorescent lightbulbs, metal cans, glass bottles and PET bottles. The

government “sets mandatory take-back and recycling requirements, which the industries need to

comply with. Most producers then join an organisation which coordinates the collection and

recycling processes” (DEA, 2018b); i.e. a Producer Responsibility Organisation (PRO). In the case of

electronic products, a significant increase (39%) in recycling rates occurred after implementation of

EPR, as well as improved design in terms of reduced weight and volume of materials; although it is

not clear how much of this can be attributed to the EPR system as compared to other factors (DEA,

2018b).

EPR is traditionally implemented through either mandatory or voluntary product take-back

schemes. Mandatory take-back obligations require that manufacturers, importers, distributors

and/or retailers take products back at the end of their useful life, usually in combination with a

recovery or recycling target, as in Germany, Austria and Taiwan. Alternatively, EPR schemes can be

implemented voluntarily by industry, often to meet targets agreed with government, as in the

Netherlands, Victoria (Australia) and the UK (Wilson, 1996; Walls, 2006). In the latter case,

government may set a framework within which industry must act, but producers are given the

financial and physical responsibility to fulfil these obligations, and the freedom to find the most

cost-effective way of doing so (Wilson, 1996). Voluntary approaches are often created by

agreements arising out a memorandum of understanding between the industry and government,

often stemming from a desire by the industry to avoid the imposition of potentially harmful

regulations (Widmer et al., 2005).

In either case, PROs are often established as cooperative industry initiatives to collectively handle

collection and arrange for recycling on behalf of the industry, so as to ensure that member

companies are able to meet their EPR obligations (Widmer et al., 2005; Walls, 2006; Nnorom and

Osibanjo, 2008).

PROs are usually financed through fees paid by member companies (producers and/or users of

packaging), per ton or unit of the packaging material or product (Walls, 2006). The purpose of PRO

fees (or EPR fees) is to provide funding for the provision of incentives, subsidies, infrastructure

and/or information to consumers, collectors and/or processors; so as to increase supply of

recyclables or recycled materials. Furthermore, the fees could encourage producers to reduce

material use or packaging volumes, which would lead to a reduction in waste generation.

EPRs fees are often passed on to consumers in the form of higher product prices, which should lead

to a decline in demand from consumers, also leading to a decline in waste generation. In other

words, EPR fees “may have a similar effect as a product tax, resulting in higher prices for the taxed

products, which may in turn reduce demand” (DEA, 2018b: 54). However, unlike product taxes, but

similarly to ARFs, “the primary intent of EPR is to fund the collection, re-use and recycling of



materials to make these processes more viable. EPR fess should therefore be set at a rate at which

this can be achieved” (DEA, 2018b: 54).

Both mandatory and voluntary take-back programs have been found to increase recycling, while

PRO fees have been found to lower material use and packaging volumes (Walls, 2006). However, in

general, mandatory schemes are often seen as overly prescriptive, and therefore inflexible and

costly; whereas firms who engage in voluntary schemes have incentives to develop innovative

strategies to ensure that costs are minimised (Walls, 2006).

Furthermore, other types of policies which fall under the EPR umbrella, but which provide different

incentive effects, can yield similar outcomes as a mandatory take-back program, often at a lower

cost (Walls, 2006). For example, according to Walls (2006), a combined ARF/incentive system may

be more cost-effective as compared to a mandatory take-back program. For example, in British

Columbia, one of the provinces involved in the Western Canada used oil program, a combined

ARF/incentive programme was found to be far more effective than the previous mandatory take-

back system, in which retailers were required to simply accept used oil from consumers at their own

expense, leading to a lack of compliance by retailers (Walls, 2006).


In South Africa, a number of voluntary, industry-managed producer responsibility schemes have

been implemented, for example in the glass, beverage can, PET and polyolefin industries, and have

been relatively successful in increasing recovery rates of the materials for which they are

responsible. For example, South Africa’s plastics recycling rate (41.8%) is higher than the average

for Europe (29.7%) (PlasticsSA, 2017). PETCO, the PRO for the PET industry, has been particularly

successful, with the PET recycling rate as high as 55% (PlasticsSA, 2017).

In addition, “Section 18(1) and (2) of the Waste Act allows the Minister to specify the financial

arrangements of a waste minimisation programme in support of Extended Producer Responsibility

arrangements” (DEA, 2018b: 54). The Department of Environment, Forestry and Fisheries (DEFF)

have recently published EPR regulations, requiring mandatory EPR in the paper and packaging,

waste electrical and electronic equipment (WEEE) and lighting industries.

However, in comparing mandatory vs voluntary EPR systems, Nahman (2010) found that voluntary

industry initiatives (as in the can, glass and PET industries) are far more effective than mandatory,

government-imposed regulations (as in the plastic bag industry) in stimulating recovery. This was

found to be due to the particular types of market failure affecting recycling markets: information

failure, technical constraints, search costs, etc.; which act as barriers to the development of a viable

recycling industry. Nahman (2010) therefore concluded that it is in the industry’s own best interests

to voluntarily implement EPR to overcome these market failures.



4.3.15 Separation at Source

Separation at source (S@S) refers to waste being separated into two or more fractions by waste

generators, in order to facilitate recovery and recycling of pre-separated materials, which should

increase both the quality (reduced contamination) and quantity of materials recovered.

DEFF has set targets for metropolitan municipalities, secondary cities and large towns to initiate

S@S programmes, as part of its National Waste Management Strategy (NWMS) (Department of

Environmental Affairs, 2011). More recently, one of the targets emanating from the Chemicals and

Waste Economy Phakisa is for “a minimum of 50% of households separating at source by 2023”

(DEA, 2019). Municipalities are also charged with providing an enabling environment for the

collection of separated recyclables (DEA, 2018b).

Various types of separation at source systems are used internationally; varying in terms of:

the number of separate fractions; ranging from a simple 2-bin (dry recyclables and residual

waste) or 3-bin system (dry recyclables, organics and residuals); to more sophisticated

systems with multiple separate fractions (such as separate containers for paper, glass,

metal, plastics, organics and residual waste) (DEA, 2018b);

The type of collection system; including the use of multiple vehicles, split-compartment

vehicles, and integration of the informal sector (making use of low-tech equipment such as

trolleys or bicycles); and

The type of sorting and treatment facilities used to deal with the various separated

fractions.

Furthermore, it is of interest to note that in a number of European countries, the focus of S@S

systems is on organic waste, rather than on dry recyclables (European Bioplastics, 2016). The

argument for such an approach is three-fold:

Organic waste tends to make up a large proportion of total waste generation; diverting

organic waste from landfill is therefore critical to achieving overall targets for diversion of

waste from landfill.

The bulk of the waste sector’s contribution to climate change arises from the decomposition

of organic waste at landfill, which generates methane, a powerful greenhouse gas.

The waste (including recyclables) remaining after organic waste has been separated will be

‘cleaner’ and less contaminated, which will thereby facilitate recovery and recycling.

Separation of organic waste at source would therefore essentially enable a ‘win-win-win’ solution.

In particular, if the aim is to divert waste from landfill, then this type of system is likely to be of

relevance for South Africa, where organic waste (together with C&D waste) makes up the bulk of

the waste going to landfill; as compared to the mainline recyclables, which make up a far smaller

proportion. For example, according to the final draft State of Waste Report (DEA, 2018a), organic

waste made up 34.6 % by weight of general waste generated in 2017.

However, any type of S@S system is likely to be costly for municipalities (unless the informal sector

can be integrated within the collection system), and needs to be incentivised or subsidised.



According to the World Bank (2019b: 2); most municipalities in South Africa “do not have financial

or technical resources to transition from existing waste separation at transfer stations to individual

household-level separation of waste… Achieving DEFF’s target of mandatory household source

separation and of 50% of the households in metros separating at source by 2023 will require

substantial technical and financial capacity building efforts at municipal level. Innovative financing

mechanisms and partnership models will be needed to: upgrade existing waste collection fleets to

accommodate separated waste; construct the necessary sorting infrastructure for recyclable

materials; to build new landfill capacity; and to rehabilitate existing landfill”.

As such, S@S would need to be implemented alongside other types of economic or regulatory

instruments aimed at incentivising, subsidising or financing the system. According to DEA

(2018b:55), “Given the financial impact of separation at source, municipalities require an incentive

to do this. If the alternative to separation at source is increased landfilling, this will certainly be

cheaper than the added costs of a second collection (at current landfill costs). Separation at source

by municipalities can therefore be incentivised by a subsidy, by increased landfill costs (e.g. though

a landfill tax), or through national regulations requiring them to do so. Such regulations would need

to consider the impact of drastically increasing the costs of solid [waste] management” (DEA,

2018b:55).

Currently in South Africa, “the majority of separation at source… is done informally by door-to-door

waste pickers. There is sufficient incentive for them to do this at current rates with no cost to the

municipality” (2018b:55). As such, integration of the informal sector is critical in order to ensure

both that informal pickers’ livelihoods are maintained, and that S@S can be done in a cost-effective

way (World Bank, 2019b).

Finally, waste generators themselves are currently not incentivised to separate their waste. “There

is a flat fee charged for waste collection to households and businesses, which is not based on volume

or type of waste generated and does not create incentives for source separation” (World Bank,

2019b:2). Both “households and informal waste pickers can be incentivised to increase the volume

of recyclables separated at source through subsidies. This is most feasibly done through payment

for recycled materials. However, to be financially feasible, this payment would need to be less than

the cost of landfilling the equivalent volume of recyclable material. Households will also be

incentivised to separate at source through the charging of volumetric tariffs” (DEA, 2018b:55-56).

As such, it is clear that targets relating to S@S need to be accompanied by instruments aimed at

incentivising and/or subsidising various elements of the system.



4.4 Conclusions from the literature review

Much of the current discussion relating to policy instruments for waste management in South Africa

pertains to economic instruments. In theory, properly designed economic instruments can

contribute to improved environmental management, particularly in a developed country context

(Forum for Economics and the Environment, 2002). However, experience has shown that text-book

outcomes cannot be expected to occur in reality, particularly in a developing country context, where

implementation of economic instruments is plagued by a variety of practical problems (Pearce and

Turner, 1994; Inter-American Development Bank, 2003). Although economic instruments “can

improve environmental management, they normally impose high administrative demands and do

not represent a ‘quick fix’ to the problems associated with more traditional command and control

approaches” (Huber et al., 1997; cited in Inter-American Development Bank, 2003:27-8).

These issues are particularly pertinent in developing countries, where the institutional capacity for

effective design, implementation, monitoring and enforcement of economic instruments is likely to

be lacking. Indeed, where economic instruments have been applied in developing countries, they

have generally not been effective; because they have not been tailored to developing country

circumstances, because they have been used primarily for raising revenue and have thus failed to

achieve environmental objectives, because price incentives (e.g. tax rates) have been set at the

wrong levels, or because of ineffective monitoring and enforcement (Bell and Russell, 2002; Russell

and Vaughan, 2003).

As such, there is a clear need for further research regarding the suitability of economic instruments

in developing countries, including South Africa; before implementation of such instruments can be

considered. For example, there is a need for research regarding the “identification and

establishment of monitoring and enforcement capabilities that would be appropriate in a

developing country setting” (United Nations Environment Program, 2005:440-1). In particular, there

is a need to understand the South African context with respect to economic instruments, and assess

the likely impacts of their implementation.

Some further relevant findings from the literature review are discussed in each of the sub-sections

below.

4.4.1 Pre-conditions for implementing economic instruments

A number of interrelated pre-conditions must be in place if economic instruments for solid waste

management are to be effective and efficient. These include:

1. Well-functioning markets and related institutions: Economic instruments require “well-

functioning markets with adequately defined property rights, the presence of private

enterprise motivated to reduce costs, some degree of competition, competent judicial

systems, and limited price distortions” (Inter-American Development Bank, 2003:26).

Developing countries are generally characterised by poorly functioning markets and/or

market failure, whereby these conditions fail to hold. Thus, for example, implementing

economic instruments requires that existing price distortions in the economy (e.g. as a



result of inappropriate subsidies) be removed (Pearce and Turner, 1994:14). It is also

“necessary to have a well-functioning and competent legal system” (Inter-American


2. Institutional capacity: Economic instruments tend to be administratively complex, and

require sufficient institutional capacity in terms of acquiring relevant information,

monitoring compliance and illegal activities, and enforcement. Thus, “the efficiency and

environmental effectiveness of such instruments is conditioned by the baseline

institutional context into which it is assumed instruments are introduced” (Pearce and

Turner, 1994:12). For example, monitoring and enforcing the activities of numerous

individual households and small enterprises is extremely difficult (Inter-American

Development Bank, 2003:27). Furthermore, setting optimal tax and subsidy rates

requires information on both household’s private costs with respect to waste generation

and disposal (e.g. the costs of preparing waste for collection and of returning

recyclables), and the external costs associated with waste generation and disposal, both

of which are likely to be difficult to acquire, and require sophisticated analysis

(Reschovsky and Stone, 1994; Inter-American Development Bank, 2003). Finally, there

can be costs associated with legal disputes and with policing “sabotage, corruption,

illegal disposal, and various forms of revenue leakage and tax evasion” (Inter-American


Thus, the implementation of economic instruments in developing countries “will be

conditioned by the effectiveness (legislation, monitoring and enforcement activities) of

the institutional system that is in place in any given developing country” (Pearce and

Turner, 1994:17). Waste management authorities, for whom authority must be clearly

delineated, must be “endowed with the expertise, human resources, equipment

[technological capacity], and financial resources needed to carry out the policies”

(United Nations Environment Program, 2005:440). Many developing countries lack the

necessary institutional capacity (Bell and Russell, 2002; Russell and Vaughan, 2003).

Thus, institutional capacity building is also an important precursor to the implementation

of economic instruments (Pearce and Turner, 1994:14). Implementation of economic

instruments may require “a substantial strengthening of human and financial resources

and of organisational structure” (United Nations Environment Program, 2005:440).

3. Political will: Finally, there must be political will to address waste as a priority issue. In

particular, given the likelihood that many economic instruments (particularly taxes and

charges) will be politically unpopular, their implementation requires genuine political

willingness. “The political will to implement these instruments is [also] likely to be

affected by the impact of these instruments on other economic areas, such as

international competitiveness” (Inter-American Development Bank, 2003:26-27).

However, there are various ways of alleviating the negative impacts associated with

taxes so as to ensure that the overall impact of the tax is neutral; such as tax shifting,

revenue recycling and transfer payments.



Most developing countries are characterised by poorly functioning markets, lack of institutional

capacity, and a lack of political will (Bell and Russell, 2002; Russell and Vaughan, 2003). For example,

in South Africa, solid waste management services are generally provided by municipalities, rather

than private enterprise, such that there is less incentive to reduce costs; and where private

companies are involved, there is generally a lack of competition, with services provided by a single

company. There is also a lack of property rights and insufficient collection of waste data; as well as

insufficient capacity for effective waste management at all levels of government, including

monitoring and billing of waste services by municipalities.

4.4.2 The need for a suite of complementary policy instruments

Experience from various countries has shown that “the most effective approach to environmental

management lies with a combination of methods” (Forum for Economics and the Environment,

2002:230). Different types of policy instruments are necessary for dealing with different aspects of

the waste management problem. In other words, “the best results are achieved when a combination

of instruments is implemented (Choe and Fraser, 1998:285-6).

In particular, economic instruments are not generally effective in isolation; instead, they “operate

best in combination with a legal framework and regulatory instruments” (Forum for Economics and

the Environment, 2002:230). Although in certain circumstances purely regulatory or economic

instruments may be necessary, often a package of complementary instruments will be more

appropriate. Such a policy package could consist of elements of both regulatory and economic

instruments, depending on the situation at hand (Organisation for Economic Cooperation and

Development, 2001; National Treasury, 2006; Stern, 2006). Therefore, ”a combination of an

effective regulatory approach and highly selective economic instruments” (Forum for Economics

and the Environment, 2002:241) will generally be needed.

Indeed, implementation of economic instruments requires and pre-supposes a foundation

(existence and enforcement) of regulations and monitoring and enforcement capabilities (United

Nations Environment Program, 2005:440). For economic instruments to be implemented

successfully, “the regulatory standard needs to be clear and the program of monitoring compliance

needs to be adequate, implying that the success of the economic instrument is dependent on

successfully implementing regulatory controls” (Inter-American Development Bank, 2003:8).

However, “even with the establishment of effective monitoring and enforcement capabilities, it is

unlikely that economic instruments will replace traditional regulatory instruments” (United Nations

Environment Program, 2005:440). Economic instruments should rather be seen as “useful

supplementary and supporting instruments embedded within the regulatory system” (Pearce and

Turner, 1994:17). Economic instruments can be used to “encourage compliance with the

regulations, particularly in countries where enforcement and penalties associated with regulations

do not provide adequate incentives” (Inter-American Development Bank, 2003:8).

For example, in some countries, regulations are used to “establish minimum performance

standards” (Forum for Economics and the Environment, 2002:230), while economic instruments are

used to “provide an incentive for environmental performance over and above the regulated levels”

(Forum for Economics and the Environment, 2002:230). However, in developing countries,



“inspection and enforcement resources are limited, and political influences may lead to inequitable

compliance requirements. In such cases, economic instruments may be designed for the

achievement of more modest standards of performance rather than over-performance” (Inter-

American Development Bank, 2003:8).

The optimal combination of economic and regulatory approaches depends on local conditions, and

will thus differ between countries. In deciding upon an appropriate combination of instruments;

social, political, economic and environmental factors must be taken into account. Configuring an

optimal, complementary mix of regulatory and economic instruments requires that different

instruments are considered simultaneously rather than in isolation (Choe and Fraser, 1998). In turn,

this requires adoption of a general (as opposed to partial) equilibrium framework, in which

incentives are seen as affected by relative tax/subsidy rates on all waste-related products and

activities, rather than by any particular tax or subsidy rate alone. For example, when illegal disposal

can be easily monitored and penalised, the optimal policy mix consists of a combination of quantity-

based collection fees and taxes on illegal dumping (Fullerton and Kinnaman, 1995). However, in

reality, a tax on illicit dumping is likely to be difficult or impossible to enforce. The same result can

be achieved, however, through a different combination of taxes and subsidies; such as a subsidy

(rather than a tax) on legal disposal (both landfilling and recycling), which provides an incentive to

dispose of waste appropriately, and a tax on consumption (a product tax), which provides an

incentive to reduce waste generation (since a subsidy for legal disposal effectively subsidises

consumption, by lowering the cost of waste disposal) (Fullerton and Kinnaman, 1995:79-80). In

other words,

“if the downstream tax on illicit dumping cannot be enforced, the same [optimal outcome]

can be achieved by using an upstream tax instead. Consumption should be taxed at a rate

that reflects not the good’s disposal cost, but its possible externality from illicit burning or

dumping. The result is a deposit-refund system… but it applies to all consumption goods

rather than just bottles or… batteries” (Fullerton and Kinnaman, 1995:80).

Thus, “waste management needs to be analysed in a comprehensive framework where various

policy instruments targeting consumption, waste disposal services and illegal waste disposal can be

considered simultaneously, along with the choice of waste disposal technologies” (Choe and Fraser,

1998:280).

The comprehensive waste management framework of which economic instruments should form a

part will also include infrastructural components (e.g. kerbside collection of recyclables, or

conveniently located drop-off centres); policy and legislative procedures; communication (including

education and awareness) programmes; and consultation processes. For example, a deposit-refund

scheme requires a viable recycling industry comprising “careful sorting, segregated collection, and

development of a strong network of industries to reuse the materials” (Inter-American

Development Bank, 2003:26). Similarly,

“evaluating the potential for quantity-based solid waste disposal pricing systems cannot be

conducted in isolation with other components of the recycling program… households are

particularly sensitive to the marginal private costs of waste reduction and less sensitive to the



costs of waste disposal… This implies that efforts to encourage widespread recycling by

imposing high quantity-based fees or by stringently enforcing mandatory recycling without

also providing a convenient means for households to recycle may be both unpopular and

ineffective” (Reschovsky and Stone, 1994:137).

Furthermore, “the solid waste sector relies on the cooperation and motivation of various

stakeholders, including consumers, producers and service providers” (Inter-American Development

Bank, 2003:17). Therefore, every effort to stimulate private sector investment and participation is

essential” (Inter-American Development Bank, 2003:17). Thus, information and voluntary

instruments are also important and must be considered along with economic and regulatory

instruments as part of an integrated waste management strategy: “Simple instruments like

neighbourhood cleanliness competitions and clean-up campaigns have proven to motivate change

in countries as diverse as Indonesia, Ghana, and Nigeria” (Inter-American Development Bank,

2003:17). Legal instruments that “strengthen liability for damage to the environment or public

health could also be useful, assuming the legal system can make such instruments operative” (Inter-

American Development Bank, 2003:30).

Furthermore, consultation, co-operation and consensus with other government departments and

industry regarding the need for regulation, the choice of instrument, and the tax/subsidy level, is

necessary to ensure that the proposed instrument will be acceptable to the affected industry and

other stakeholders (O'Connor and Turnham, 1992; National Treasury, 2006). The environmental and

fiscal objectives of any proposed instrument must be clearly stated (Organisation for Economic

Cooperation and Development, 2001; National Treasury, 2006).

Furthermore, economic instruments are central to the concept of ‘Design for Environment’ (DfE),

whereby “solid waste policy is shifting from waste disposal concerns back upstream to product and

process design issues” (Calcott and Walls, 2005:288). This involves moving up the waste

management hierarchy (Figure 1), and is thus related to the concept of integrated waste

management:

“Solid waste policy should provide correct incentives for both ‘‘upstream’’ and

‘‘downstream’’ decisions. Upstream, it should encourage product design to reflect

environmental concerns, and downstream it should encourage recycling [and] diverting solid

waste from landfills… Producers choose an amount of packaging for their products and a

degree of recyclability, where recyclability is the fraction of the product that can be recycled…

Efficient DfE [Design for Environment] requires incentives for producers to design products

that are easily recycled. Such incentives would be generated by fully functioning markets for

recyclables, whereby recyclers pay consumers a price for their used products that depends

on the degree of recyclability. Alternatively, such incentives could be provided by a tax–

subsidy combination (a deposit–refund scheme), if taxes and subsidies were customized to

the recyclability of each specific product” (Calcott and Walls, 2005:287-8).

Thus, economic instruments “have a potentially very significant role to play in the waste

management policy of the future. But the overall watchword for such a policy has to be integration”

(Pearce and Turner, 1993:88).



4.4.3 Using tax revenues appropriately

In the case of taxes, charges, and fees; a decision must also be made as to whether the aim of the

policy is to raise revenue (to cover the costs of existing waste management services; or finance

improvements in waste management services, facilities, or infrastructure; or for some other

purpose); or to achieve environmental aims (reduced waste generation, or increased

recycling/reduced disposal to landfill). Generally, there will be a trade-off between these two

purposes. Taxes that are effective in achieving environmental aims (e.g. reducing the targeted

behavior, such as landfilling) will erode their own tax base to some extent (because there will be

less waste going to landfill, for example), such that less revenue can be generated. By contrast,

taxes that are effective in raising revenue imply little change in behaviour, such that environmental

aims will not be achieved. Furthermore, “a balance will need to be struck in terms of the level of

the charge that could be levied; so that a meaningful amount of finance is raised but at the same

time not at a charge rate that stimulates extensive 'illegal' dumping, or corrupt practices” (Pearce

and Turner, 1994:12-13).

In developing countries, economic instruments tend to be ineffective because they are typically

used as sources of revenue for cash-strapped governments rather than as incentives for changing

behaviour so as to achieve environmental aims (Bell and Russell, 2002; Russell and Vaughan, 2003).

Issues such as earmarking of revenues for reuse within the field of waste management therefore

arise (see below). In cases where tax revenues cannot be ring-fenced to fund improved waste

management, the argument for economic instruments becomes weaker. In such a case, if they are

to be used at all, economic instruments should be designed in such a way as to incentivise the

desired behaviour, rather than as a tool for revenue-raising.

At the same time, even if a tax is aimed at motivating environmental improvement, it will also

generate some amount of revenue. Thus, a decision needs to be made regarding how revenue

collected from the tax should be used. Ideally, the revenues should be channelled back to the solid

waste sector; for example, to finance improved waste management services, infrastructure, or

facilities; or to finance complementary policies like subsidies or grants. Thus, for example, activities

imposing negative externalities can be discouraged by means of a tax, while the revenue collected

can be used to encourage activities creating positive externalities by means of subsidies (National

Treasury, 2006). Revenues could also be used for “specific waste management investments, general

improvement in waste management services, waste-related environmental remediation, or other

applications” (Inter-American Development Bank, 2003:30).

In principle, there are three options as to how revenues can be channelled towards related

environmental investments or recycled back to the industry; namely full earmarking, soft/partial

earmarking, and allocations through the normal budget process. Full earmarking is generally seen

as inappropriate in international literature and practice, as it reduces transparency and increases

the scope for special interest groups to capture revenue. Earmarked taxes “tend to fragment and

complicate the tax system and allow departments and agencies to escape the discipline of the

budget process” (National Treasury, 2006:101). They also create rigidities and result in an

inappropriate allocation of resources. International best practice asserts that government spending



decisions should be separated from revenue collection, via the fiscal budget process (National

Treasury, 2006). Thus, South Africa’s Department of Finance does not allow the earmarking of

environmental tax revenue for related environmental projects. This has meant, for example, that

revenue from South Africa’s plastic bag levy has gone into general government funds rather than

being used to finance recycling of plastic bags (Gosling, 2006).

However, in the absence of earmarking, there is no guarantee that any funds will be channelled

back to the solid waste sector. A compromise may be to use ‘soft’ or ‘partial’ earmarking, whereby

“revenues will flow via the fiscus with the provision that special consideration be given to fund

certain activities, but with no fixed commitment to allocate all the revenues from a specific source

to such activities” (National Treasury, 2006:105). Alternatively, allocations can be made through

the normal budget process. However, even in this case, there is no guarantee of revenues being

channeled back to the solid waste sector. In general, there are no clear guidelines to determine

whether earmarking is appropriate; instead, the desirability of earmarking needs to be assessed

case-by-case, and, where earmarking is granted, regularly re-evaluated to ensure its ongoing

desirability (National Treasury, 2006).

Any remaining revenues (after allocations to the solid waste sector) can potentially be used to

“provide room for discretionary reductions in other taxes to reduce distortions (efficiency losses) in

labour or capital markets” (Organisation for Economic Cooperation and Development, 2001:5-6),

thus generating a so-called ‘double-dividend’ of environmental improvement and economic

efficiency gains. For example, in some European countries,

“not all of the money generated through economic instruments is needed for purposes of

environmental improvement. Eco-taxes are increasingly being set at high levels to discourage

waste generation and pollution, and surplus revenues are being applied to reduce other

taxes” (Inter-American Development Bank, 2003:13-14).

For example, some of the revenues generated by the UK Aggregates Levy are recycled back to the

industry through a 0.1% reduction in pay-roll taxes (National Treasury, 2006), thereby creating

another type of ‘double-dividend’ in terms of reducing distortions and promoting employment

opportunities. Another portion of the revenue is used to finance projects that minimise demand for

extraction of virgin aggregates and promote cleaner extraction and transport of aggregates, among

other objectives (Department for Environment Food and Rural Affairs, 2006a).

However,

“This “double dividend” of economic and environmental improvement through eco-taxes

needs careful assessment in each country. While it may be important in European countries

known for their very high income taxes, it possibly has little relevance in… most developing

countries, where income taxes are more modest” (Inter-American Development Bank,

2003:13-14).

As such, in the South African context, where allocation of revenues from environmental taxation

back to the solid waste sector (either through full or partial earmarking or the normal budget



process) is problematic; and where designing a tax in such a way as to achieve environmental gains

is likely to be difficult; the case for environmental taxation becomes a rather weak one.

4.4.4 The need for gradualism

If economic instruments are to be considered, it is critical that they are phased in gradually, building

on pre-existing institutional structures, legislative frameworks and government policies, and in

accordance with a pre-announced timeline; in order to ensure sufficient time for consultation,

certainty regarding what is required from industry, and acceptance; and to build confidence and

institutional capacity (O'Connor and Turnham, 1992; Organisation for Economic Cooperation and

Development, 2001; Bell and Russell, 2002).

In other words, components of economic instruments should be implemented as part of an

integrated waste management framework in progressively more institutionally-demanding stages,

with the focus on gradually developing institutional capacity (Pearce and Turner, 1994; Bell and

Russell, 2002; Russell and Vaughan, 2003). For example, in the control of industrial pollution

emissions, Russell and Vaughan (2003) recommend starting with a technology standard, which

requires relatively little monitoring capacity, followed by a technology-based discharge standard as

institutional capacity grows, and finally converting these non-marketable discharge permits into

marketable permits as part of a full-blown permit-trading scheme.

What is needed in the field of solid waste management is a similarly stage-based approach to

implementing economic instruments. In developing countries specifically, the priority should be on

building and augmenting institutional capacity; with information building and sharing, gradualism

and flexibility being key issues for successful implementation (Pearce and Turner, 1994; Huber et

al., 1997). In addition, it is necessary to build on what already exists, and learn from past failures.

For example, if there are already economic instruments in place, “they need to be reviewed for their

effectiveness and improved to the extent possible” (Inter-American Development Bank, 2003:30),

before considering implementation of any new economic instruments.



5 Addressing the root causes for the dominance of landfilling:

Identifying “Levers for Change” for increasing the diversion of waste

from landfill

In this section, we overlay the root causes for the dominance of landfilling as a waste management

option in South Africa, discussed in Section 3; with the potential instruments for diverting waste

from landfill identified in Section 4; in order to identify which specific types of instruments are best

suited to addressing the identified root causes. Specifically, the focus is on identifying “Levers for

Change”, in terms of solutions for addressing the various root causes identified, and thereby

increasing the diversion of waste from landfill in South Africa toward alternative waste management

options.

The information in this Section is presented in the form of tables (see Tables 7 to 12, which

correspond with the six categories of root causes discussed in Sections 3.1 to 3.6). Each table

summarises the root causes identified in Section 3 (first two columns), as well as the mechanism by

which each of the root causes results in waste not being diverted from landfill (third column). Finally,

the fourth column of each table identifies potential “levers for change”, in terms of potential

solutions to each of the identified challenges.

Note that in this Section, the range of potential solutions identified is broad, and includes many of

the economic, regulatory and other instruments identified in the literature review (Section 4); as

well as a range of other potential solutions identified by experts and stakeholders during the

research; including during the workshops conducted in March and April 2019 (see Section 3), as well

as in other one-on-one discussions and consultations.

The various solutions identified can be implemented by role players at different levels; including the

various tiers of government (national, provincial or local), industry, waste generators, etc. The

intention is to highlight the fact that, given the complex nature of the problem and the broad range

of issues that need to be addressed, no single type of intervention on its own is likely to be effective;

nor will actions by any one role-player be effective in isolation. Instead, a suite of complementary

interventions will be required, with action required by all stakeholders involved.

Thereafter, in Section 6, the focus is refined to hone in specifically on economic instruments and

incentives that can be implemented specifically by national government, in accordance with the

objectives of this study.



5.1 Legislative barriers

Table 7: Legislative barriers and potential solutions

Root causes End result Potential solutions / Levers for change

Type of barrier Specific issues / examples

Municipalities are

mandated to collect and

dispose

The constitutional mandate of

municipalities is the collection and

disposal of waste.

In line with this mandate, KPI’s for

municipal solid waste managers are

focused on disposal of waste to landfill, so

there is no incentive to divert waste from

landfill. Implementing alternatives to

landfill, such as recycling, is not seen by

municipalities as being their

responsibility.

Adapt KPI’s of municipal solid waste

managers to include diversion of waste from

landfill toward appropriate alternatives.

Training and capacity building on the circular

economy and benefits for municipalities to

buy into the diversion of waste from landfill.

The NWMS does not

allocate and delineate

responsibilities

The 2011 NWMS (DEA, 2011) put targets

in place for waste diversion from

landfill, but failed to put measures in

place to ensure waste reduction, reuse,

recycling, and recovery.

The 2020 NWMS (DEFF, 2021) is also not

clear on roles and responsibilities.

Section 9 does not clearly distinguish

who should do what to enable diversion

of waste from landfill.

No action is taken. Municipalities wait for

industry to take action, while industry

waits for government to create an

enabling environment to support waste

reduction, reuse, recycling, and recovery.

Create a platform/roundtable discussion

session for industry and municipalities to

unpack the 2020 NWMS and the EPR

regulations to determine linkages and how

implementation should be supported.

Clearly outline what an enabling environment

will look like and how it should be created.

Legislation makes it

difficult for private sector

to get involved

Beneficiation of materials classified as

waste requires that Waste Management

Licenses (WMLs) be obtained, EIAs must

be conducted; etc.; which are

cumbersome and costly processes.

Lack of incentives for private sector

involvement in beneficiation of materials

classified as waste.

DEFF have started allowing for applications to

be made for the exclusion of certain waste

streams (or a portion thereof) for beneficial

use from the definition of waste.




Type of barrier Specific issues / examples

Municipal by-laws assign ownership of

waste to municipalities.

Waste is considered to be a municipal

asset and therefore private sector

involvement requires processes under the

MFMA. A municipality cannot simply give

away municipal assets. It is therefore

difficult for the private sector to access

such waste streams for beneficiation.

The model by-law prepared by DEFF and

available on SAWIC needs to be revised.

Municipal by-laws must be updated removing

ownership of waste.

MFMA procurement rules favour three

year limits on contracts; while

infrastructure and assets are typically

amortised over a longer period.

Investment in infrastructure cannot be

recouped over a three-year period; there

is therefore no incentive for private sector

involvement in waste management and

beneficiation activities.

Longer term contacts are possible and should

be encouraged through training and capacity

building of municipal officials on how to enter

into longer term contracts.

There is a need for templates and guidelines

for municipalities on how to navigate the

MFMA for longer term contracts.

Procurement, compliance and

regulatory obstacles and red tape make

it a difficult and lengthy process to

establish public-private partnerships.

Lack of PPPs, which would lower the cost

of waste beneficiation activities.

Development of guidelines for municipalities

to enter into PPPs.

Sharing of experiences and learning between

municipalities.



5.2 Low cost of landfilling

Table 8: Issues related to the low cost of landfilling, and potential solutions


Type of barrier Specific issues/examples

Many landfill sites

in South Africa are

unregulated,

unlicensed and/or

non-compliant, and

therefore the cost

of landfilling is

artificially low

Unregulated and/or unlicensed landfill

sites.

The cost of landfilling is artificially low,

creating incentives for continued

landfilling.

Licensing of landfill sites.

Provision of funding for landfill infrastructure should be

conditional on landfills sites being licensed (conditional

grants).

Non-compliance with license

conditions / Norms and Standards.

The cost of landfilling is artificially low,

creating incentives for continued

landfilling.

Enforcing compliance through penalties/fines

Funding to upgrade waste management infrastructure

(e.g. through a dedicated fund for waste infrastructure).


conditional on the degree of compliance with license

conditions/ Norms and Standards (conditional grants).

Lack of full cost

accounting and cost

recovery for waste

services

Municipalities typically source funding

for waste infrastructure as part of a

larger loan or through capital grants.

Capital expenditure on waste

infrastructure is not reflected in

operating costs; so municipalities do not

see the cost implications of the

infrastructure. Tariffs are therefore set

too low to recover these costs; and do

not create incentives for reduced waste

generation.

Funding for waste infrastructure should be allocated on

a cost sharing basis to incentivize the municipality taking

ownership.

Lack of full cost accounting. Tariffs are set too low to recover full

costs, and do not create incentives for

reduced waste generation.

Provide training and capacity development in full cost

accounting.


conditional on full cost accounting practices being

followed (conditional grants).





Tariffs must be approved by municipal

councils, who are obliged to balance

cost recovery objectives with

affordability to ratepayers.

Actual tariffs may be lower than those

required to ensure cost recovery, and

do not create incentives for reduced

waste generation.

Cost-reflective waste tariffs


conditional on the degree to which tariffs are cost

reflective (conditional grants).

Solid waste tariffs are generally set as

a flat monthly fee, or flat fee per bin,

rather than taking into account the

actual quantity of waste generated.

Solid waste tariffs do not reflect the

costs per tonne of waste generated and

therefore do not create incentives for

reduced waste generation.

Quantity-based (‘pay-as-you-throw’) tariffs could be

considered where technically feasible.

Municipalities are obliged to provide

solid waste services to indigent

households for free.

No tariffs or fees are applicable in this

instance, so there is no incentive for

households to reduce waste generation.

Non-monetary incentives should be introduced to

reduce waste generation.

Many municipalities charge very low

landfill tipping fees, or do not charge

for the first tonne disposed; or, in

some cases, do not charge landfill

tipping fees at all.

Landfill tipping fees are too low, thereby

not creating incentives to divert waste

from landfill.

Cost reflective tipping fees


conditional on cost reflective landfill tipping fees being

applied (conditional grants).

Externalities are not

internalized

The cost of landfilling is too low

relative to the ‘true’ (social) cost.

Solid waste tariffs and landfill gate fees

do not reflect the external costs of

landfilling, and do not create incentives

for reduced waste generation.

In the long term, once all of the prerequisites have been

addressed (licensing of landfill sites, compliance with

norms and standards, establishment of requisite

infrastructure e.g. functioning weighbridges, cost

recovery, full cost accounting etc.); and if the cost of

landfilling remains too low relative to alternatives; a

landfill tax could be considered; following the guidelines,

recommendations and timelines of the Landfill Tax

Feasibility Study (once available) and the National

Pricing Strategy (DEA, 2016).



5.3 High cost of alternative waste management options

Table 9: Issues related to the high cost of alternative waste management options, and potential solutions



Alternatives to landfilling

are generally more

expensive; particularly in

the absence of the

required economies of

scale

High capital costs (vehicles for separate

collection, infrastructure for sorting and

processing, etc.).

Lack of infrastructure for separate

collection, sorting and processing of

waste; which reduces the viability of

recycling.

Funding for the infrastructure required

for alternatives (e.g. through a dedicated

fund for waste infrastructure).

Tax credits for investing in infrastructure

for alternative treatment.

Regionalisation / joint ventures among

municipalities to pool resources and

reduce costs.

High operating costs (costs associated with

separate collection and transport of waste,

energy costs associated with processing,

etc.).

Lack of separate collection, sorting and

processing of waste; which reduces the

viability of recycling.

Subsidies paid per unit or per kg of

material processed through alternative

waste treatment.

Private sector involvement.

Integration of waste pickers in collection

in order to reduce costs.

Create local markets whereby waste is

processed and used close to source, to

reduce transport costs.



5.4 Lack of funding and other resources

Table 10: Issues related to the lack of funding and other resources, and potential solutions



Lack of funding for

capital infrastructure

The capital infrastructure required for

alternatives is not suited to funding from

municipal sources (such as tariffs); instead,

municipalities rely on funding from national

sources for such infrastructure.

Lack of infrastructure for separate

collection, sorting and processing of

waste; which reduces the viability of

recycling.

Dedicated fund for waste infrastructure.

PPPs.

Difficult to raise tariffs Covering the higher OPEX costs associated

with alternatives would require that tariffs are

raised, which is difficult from a political and

affordability perspective.

Lack of separate collection, sorting and

processing of waste; which reduces the

viability of recycling.

Private sector involvement.

Integration of waste pickers in collection

in order to reduce costs.

Create local markets whereby waste is

processed and used close to source, to

reduce transport costs.

Lack of skills Municipalities generally lack skills and capacity

for waste management (for example,

municipal solid waste officials are often not

trained in waste management); and many

municipalities still struggle with the basics

(collection and disposal).

There is a lack of expertise and knowledge

to understand and properly assess the

wide range of alternative technology

options and their appropriateness (and

associated risks), leading to confusion and

uninformed decisions, or inaction.

Waste management training and

capacity development; e.g. building on

the DSI-funded post-graduate degree

courses offered in waste management at

North-West University (NWU) and

University of KwaZulu-Natal (UKZN).

There is a lack of understanding regarding

economic and financial aspects. For example,

there is a lack of expertise to conduct full cost

accounting; to quantify the value of waste; and

to properly assess the costs and benefits of

landfilling vs. alternatives; including

Ignorance of the true cost of waste

management among municipal officials

and community members; and therefore

of the benefits of alternatives; leading to

a failure to move away from the status

quo.

Training in economic and financial

aspects, and particularly in full cost

accounting.

Awareness raising on what is included in

waste tariffs and what it costs the

municipality to manage waste, on a per

household per year basis.





externalities, indirect costs and benefits, and

avoided costs.

Lack of data There is a lack of data to inform decisions, e.g.

a lack of baseline information on the volumes

and types of waste generated, waste

composition, and of whether the quality of the

waste is suitable for specific alternative

technology options.

Planning is based on estimates and best

guesses.

IWMPs are not practical or customized to

local conditions.

Feasibility studies to introduce alternative

treatment options are overly costly due to

the lack of accurate data.

Reporting to the South African Waste

Information System (SAWIS) should be

incentivized. For example, provision of

funding for landfill infrastructure should

be conditional on reporting to SAWIS

(conditional grants).



5.5 (Perceived) lack of benefits from alternative waste management options

Table 11: Issues related to the (perceived) lack of benefits from alternative waste management options, and potential solutions



Where there is airspace

available, there is no

incentive to divert

waste

In the case of municipalities who still have many

years of available airspace, there is no apparent

benefit associated with saving landfill airspace

(except in the very long term). Municipalities

have invested CAPEX in the establishment of

landfills; so as long as there is still airspace

remaining, municipalities need to continue

landfilling so as to recover these ‘sunk’ costs;

and can’t justify spending additional CAPEX on

alternative infrastructure.

Diversion of waste away from landfill is

not considered an important issue by

municipalities with sufficient landfill

space for the foreseeable future. As such,

the national policy imperative to move

waste up the hierarchy and support a

circular economy is not gaining traction.

Landfill bans on certain waste streams.

Failure to properly

understand or account

for the benefits

Financial cost-benefit analyses and short-term

municipal budgeting processes do not currently

incorporate externalities, indirect benefits, or

avoided costs.

Specifically, they do not account for the value of

waste, the long term benefits of diverting waste

from landfill (particularly when there are many

years of landfill airspace still available), or

benefits in terms of the production of energy

and other by-products from alternative waste

treatment.

The benefits of diversion of waste away

from landfill are not recognized or

understood by municipalities.

Upgrade accounting principles and

provide capacity building to include

broader accounting of impacts.

Market prices are too

low

In many cases, market prices for recyclables are

too low relative to the costs of recovering such

The costs associated with collection and

recovery of recyclables, specifically

“Top-up” incentives (e.g. paid to

collectors per kg of material collected).





materials; and as such there is no profit to be

made.

plastics, often outweighs the value of the

material as a secondary resource.

Fluctuating market

price of virgin materials

Virgin material prices are linked to commodity

prices (e.g. oil prices).

The fluctuating market price of virgin

materials relative to recycled materials

means that there is no guaranteed

market for recycled materials, which

disincentivises investment in recycling

infrastructure.

Income guarantees/price support for

recyclers, to provide a buffer against

market volatility.

Lack of markets The global demand for recyclables has crashed

as a result of the Chinese ban on waste imports;

while the local market is limited in many cases.

Lack of markets for recyclables and

secondary resources. In turn, this reduces

the viability of recovery and recycling,

with the result that these materials are

disposed of to landfill instead.

In particular, recycling is not considered a

viable option in many, especially rural,

municipalities in South Africa.

The business case for SMME involvement

in recycling is more viable than for big

corporates, but SMMEs are more

vulnerable to price fluctuations.

Tax credits/rebates for using recycled

materials.

Minimum recycled content for products.

Adapting standards to accommodate

recycled content.

Quality standards for products made

from recycled material.

Government procurement policies

favouring recycled materials.

Awareness raising to change perceptions

regarding quality.

Off-take agreements.

Lack of off-take agreements to guarantee a

market.

Virgin materials tend to

be cheaper

Some recycled materials (or the end- products

produced from such materials) are unable to

compete in the market, because virgin

alternatives tend to be cheaper. This is

particularly the case when oil prices are low,

which reduces the price of virgin plastics and

other virgin materials, such that recycled

materials are unable to compete.

Recycled materials (or the products

produced from such materials) are unable

to compete in the market; and as such

there is no incentive for recycling or for

the use of recycled materials.

Virgin material taxes.

Elimination of perverse subsidies on

virgin materials.



5.6 Behavioural and institutional issues

Table 12: Behavioural and institutional issues, and potential solutions



Lack of an effective

enabling environment

created by national

government

There is a perception that national

government legislation, policy and other

initiatives are fragmented and

uncoordinated; and that decisions are made

without a full understanding of the problem

or without the required information; and in

particular without taking into account the

local context.

Lack of enabling environment for waste

diversion from landfill. There needs to

be an appropriate balance between

regulation and stimulation of the circular

economy.

Streamline policy and legislation and make

it adaptable to local conditions.

Less regulation is likely to be more

conducive than more regulation.

Producers don’t take

responsibility for their

products at end of life

In the absence of Extended Producer

Responsibility schemes, producers generally

do not take responsibility for the waste

generated as a result of the products that

they put on the market; managing this waste

then becomes the municipality’s problem.

If neither producers nor municipalities

see recycling as their responsibility, then

no progress is likely to be seen in

diverting waste from landfill.

Extended producer responsibility (EPR).

Manufacturers need to be responsible for

the waste they produce – e.g. they need to

contribute to the costs of disposal, focus on

design for recycling, etc. Financial

incentives need to be designed in such a

way that funds flow back to the value chain

rather than through taxation.

It is difficult to change

deeply entrenched

behavioural patterns

among waste generators

Behavioural patterns are affected by, among

other things, values, attitudes and culture

(for example, South Africa is generally

characterized by a ‘throwaway’ culture; while

taking care of the environment is generally

low on the priority list); and are therefore

deeply entrenched and difficult to change.

Lack of S@S, therefore the quantity and

quality of waste recovered is not

sufficient for alternative treatment or

recycling.

Education and awareness raising (e.g.

including recycling in school curricula to

raise awareness among the youth will help

address the issue of taking responsibility for

one’s own waste).

Involvement of and benefits for local

communities.





In particular, people do not tend to associate

with waste, but see it as the municipality’s

responsibility; and the value of waste is not

appreciated.

It is easier to simply throw waste in the trash;

separating waste for recycling takes

additional time and effort.




recycling.

Provision of convenient recycling

infrastructure/ services (e.g. S@S, provision

of separate bins/bags, strategically

positioned drop-off centres, mobile BBC’s,

etc.)

Incentives for waste generators to separate

waste at source; such as

o Quantity-based (‘pay-as-you-throw’)

tariffs (where feasible)

o Deposit-refund schemes

o Credits/vouchers for separating at

source.

There is a lack of knowledge or awareness

around recycling – e.g. around how, what and

where to recycle.




recycling.

Information provision, education and

awareness raising.

Generally speaking, there is a lack of

convenient recycling facilities in many areas,

and in particular a lack of separation at source

with kerbside collection of recyclables.




recycling.

Provision of convenient recycling

infrastructure/ services (e.g. S@S, provision

of separate bins/bags, strategically

positioned drop-off centres, mobile BBC’s,

etc.)

Even in cases where separation at source

programmes are implemented, participation

rates are generally low. There are various

reasons for this, including a lack of

Low participation in S@S, therefore the



recycling.

Ensure reliable service delivery – provision

of bins/bags, collections as per schedule,

communication regarding delays.





awareness, poor service delivery resulting in

people losing faith in the system, etc.

Institutional issues within

municipalities

Since municipalities’ mandate is to collect

and dispose of waste (see Table 7), they do

not see recycling as their responsibility.

If neither producers nor municipalities

see recycling as their responsibility, then

no progress is likely to be seen in

diverting waste from landfill.

Clear distinction of roles and

responsibilities for diversion of waste from

landfill is required.


and dispose of waste, KPI’s for municipal solid

waste managers are focused on disposal of

waste to landfill.

There is no incentive to divert waste

away from landfill.

Adapt KPI’s of municipal solid waste

managers to include diversion of waste

from landfill toward appropriate

alternatives.


and dispose of waste; landfilling is,

historically, what municipalities are

accustomed to doing. It is therefore seen as

‘easy’ and ‘convenient’. On the other hand,

alternatives are unchartered territory; and

there is a fear of the unknown, an

unwillingness to take risks, and institutional

resistance to change.

Inaction. Clear distinction of roles and

responsibilities for diversion of waste from

landfill is required.

There is a lack of accountability for the

implementation of Integrated Development

Plans (IDPs) and Integrated Waste

Management Plans (IWMPs); and in

particular, there is a lack of political will or

commitment to implement alternatives to

landfilling.

IDPs and IWMPS are developed as tick-

box exercises with limited

implementation.

Penalties for non-performance against IDPs

and IWMPs are required.

Waste is low on the priority list for

municipalities; funds tends to be directed to

other priorities; such as health, roads and

Financial allocation to waste

management is limited; such that there

is a lack of funding for improved landfill

Dedicated fund for waste management

infrastructure





sanitation; while there is also corruption and

mismanagement of funds.

infrastructure to ensure compliance

(which would raise cost of landfilling and

incentivize diversion), and for

implementation of alternatives.

Municipalities tend to operate in silos. Lack of shared learning, participation, or

learning from what has worked well

previously (e.g. in terms of how to

implement projects in an efficient and

cost-effective way); leading to costly

mistakes being repeated, and/or

inaction.

Provincial municipal waste management

forums for municipalities to share

knowledge and experiences.

Lack of collaboration and

partnerships: Generally

speaking, there is a lack

of effective collaboration

and partnerships among

the various actors in the

value chain

Lack of collaboration between producers and

municipalities / the South African Local

Government Association (SALGA).

Uncoordinated efforts that are unable to

gain momentum.

Clearly defined roles and responsibilities,

and closer collaboration.

Poor relationships between municipalities

and private sector waste companies (in

particular, there is a need for increased

involvement of private sector waste

management companies, e.g. through public-

private partnerships (PPPs).

Lack of trust between municipalities and

private sector; and failure to get projects

off the ground.

Development of guidelines for

municipalities to enter into PPPs.

Competition/lack of collaboration between

the formal sector (municipalities and private

sector collectors) and informal waste

reclaimers.

Uncoordinated recycling activities

and/or lack of S@S programmes; which

become unviable if waste reclaimers

obtain high value materials first, or

negatively impact reclaimers’ livelihoods

if they are denied access.

Integrate informal waste reclaimers into

the collection system; based on the Waste

Picker Integration Guideline for South

Africa (DEA and DST, 2019).



6 Guidelines for implementing economic instruments to incentivise

diversion of waste from landfill

It should be clear from previous sections of this report that there are a wide range of complex

challenges and barriers to the diversion of waste from landfill in South Africa; including legislative

barriers (Section 3.1), economic/financial barriers (Sections 3.2 to 3.5), and behavioural and

institutional issues (Section 3.6). As such, a comprehensive and coherent set of mutually reinforcing

regulatory, economic and other interventions is required to address the various issues and ensure

implementation of the waste hierarchy (see Section 5).

In this Section, however, we focus specifically on addressing the economic and financial challenges

identified in Section 3; namely:

Low cost of landfilling

High cost of alternative waste management options

Lack of funding

(Perceived) lack of benefits from alternative waste management options

In particular, the focus is on economic instruments and incentives that can potentially be

implemented by national government to address these issues. In other words, the focus is

specifically on the economic instruments that could play a role in incentivising the diversion of waste

from landfill, with a specific focus on those that could be implemented by national government. The

aim of this section is to provide some practical guidance regarding the implementation of these

instruments in the South Africa context (in line with Objective 5 of the study). The information in

this section is also provided in a dedicated guideline intended for national government, which aims

to provide practical guidance regarding the selection, design and implementation of economic

instruments for incentivizing the diversion of waste from landfill toward alternative waste

management options.

Potential economic instruments that can be used to address each of the economic and financial

issues are summarised in Table 13 (bold font); based on the outcomes of the review of international

experience and lessons learned (Section 4), and the identification of instruments for addressing the

specific root causes for the dominance of landfilling in the South African context (Section 5).



Table 13: Economic and financial root causes for the dominance of landfilling as a waste management option,

and potential economic instruments for incentivising the diversion of waste from landfill

Economic and financial issues / challenges Potential economic instruments to address the issues


Many landfill sites in SA are

unregulated, unlicensed

and/or non-compliant, and

therefore the cost of

landfilling is artificially low

Funding to upgrade waste management infrastructure

(e.g. through a dedicated fund for waste infrastructure)


conditional on landfill sites being licensed and/or on the

degree of compliance with permit conditions/ Norms

and Standards (conditional grants)

Lack of full cost accounting

for waste services


conditional on full cost accounting practices being

followed (conditional grants)

Lack of cost recovery for

waste services


conditional on the degree to which tariffs are cost

reflective (conditional grants)

Externalities are not

internalised

In the long term, once all of the prerequisites have been

addressed; if the cost of landfilling remains too low

relative to alternatives; a landfill tax could be

considered; following the guidelines, recommendations

and timelines of the Landfill Tax Feasibility Study (once

available) and the National Pricing Strategy (DEA, 2016).


High capital costs Funding for the infrastructure required for alternatives

(e.g. through a dedicated fund for waste infrastructure)

Tax credits for investing in infrastructure for alternative

waste treatment

High operating costs Subsidies paid per unit or per kg of material processed

through alternative waste treatment

Lack of funding

Lack of funding for capital

infrastructure

Dedicated fund for waste infrastructure

Difficult to raise tariffs for

higher operating costs

Not specifically addressed through economic

instruments


Market prices are too low ‘Top-up’ incentives (e.g. paid to collectors per kg of

material collected), to increase the value of recyclables

and thereby incentivise collection/recovery

Fluctuating market price of

virgin materials (linked to

global commodity prices)

Income guarantees/price support for recyclers, to

provide a buffer against market volatility

Lack of markets Tax credits/rebates for using recycled materials

Some recycled materials

(or end-products from such

materials) unable to

compete in the market

(virgin alternatives

cheaper)

Virgin material taxes

Elimination of perverse subsidies on virgin materials



In the remainder of this Section, guidance is provided with respect to implementation of these

instruments. Note that the various types of subsidies, tax concessions and related instruments are

discussed collectively, since these types of instruments share many common elements. As such, this

Section focuses on the following instruments:

1. Conditional grant funding for waste infrastructure (through a dedicated fund for waste

infrastructure, with conditions attached to funding).

2. Landfill tax.

3. Subsidies, tax concessions and incentives (includes tax credits for investing in infrastructure

for alternative treatment, subsidies paid per unit or per kg of material processed through

alternative waste treatment, tax credits/rebates for using recycled materials, income

guarantees/price support to recyclers, and ‘top up’ incentives to collectors).

4. Virgin material taxes (and elimination of perverse subsidies).

The National Pricing Strategy for Waste Management (DEA, 2016) provides some guidance

regarding the steps to be taken in selecting an appropriate economic instrument (Section 3 of the

Strategy) and setting waste management charges (Section 4). It also provides some preliminary

guidance regarding the implementation of economic instruments (Section 5); although this is fairly

generic in nature. In particular, it provides a recommended process for considering government

intervention (see Figure 7). Finally, the Strategy provides recommendations regarding the

institutional arrangements for the collection and disbursement of revenues from the various types

of economic instruments (Section 6 of the Strategy), and for monitoring and evaluation (Section 7).

(DEA, 2016).

In general, the process to be followed in considering government intervention (in the form of

economic instruments) is as follows (see Figure 7) (DEA, 2016):

1. Identification of environmental problem and (fiscal) objective(s)

E.g. is the objective to create an appropriate set of incentives and thereby change

behaviour, by addressing a specific market failure (e.g. internalising an

environmental externality); or is it to raise revenue?

2. Should the government intervene?

Government intervention in the form of environmental taxation or other economic

instruments is generally only justified where there is a specific market failure (e.g.

an environmental externality) to be addressed.

A number of pre-conditions need to be in place before economic instruments can

be implemented; including

i. Well-functioning markets (including removal of existing price distortions)

and related institutions

ii. Institutional capacity (e.g. for acquiring relevant information, monitoring

compliance and illegal activities, and enforcement).

iii. Political will



Figure 7: Process for considering government intervention (DEA, 2016).

Economic instruments are not recommended in cases where there are underlying

structural issues to be addressed. For example, where pervasive under-pricing

exists due to landfill sites being largely unlicensed or non-compliant, a lack of full-

cost accounting, and/or tariffs being set below the levels required for cost-recovery

(see Section 3.2), these issues need to be corrected before considering the

implementation of a landfill tax, which could create further distortions (DEA, 2016).

In particular, in the case of landfills; licensing of landfill sites, compliance with

permit conditions and with the Norms and Standards, full cost accounting, and cost-



reflective tariffs (enabling full cost recovery) for waste management services need

to be in place before a landfill tax can be considered.

3. Early signal of government intent

4. Analysis of options (selecting an appropriate economic instrument to address the identified

market failure and create the required incentives)

5. Choice of instrument

Thereafter, once a preferred economic instrument has been identified, a process of evaluation of

the appropriateness and potential impacts of the instrument needs to take place. This should

include an assessment of the full social, economic and environmental costs and benefits, including

potential impacts on municipalities, producers and/or consumers (DEA, 2016). Specifically, the

following criteria should be applied for assessing economic instruments (National Treasury, 2006):

Environmental effectiveness

Tax revenue

Support for the tax

Legislative aspects

Technical and administrative issues

Competitiveness effects

Distributional impacts

Adjoining policy areas

Finally, once it has been established that the identified instrument is appropriate; and that the

overall social, economic and environmental benefits outweigh the costs; the process of instrument

design can be undertaken, including the establishment of the required administrative mechanisms.

The instrument should be designed so as to maximise social, economic and environmental benefits,

and minimise social, economic and environmental costs (including potential competitiveness and

distributional impacts).

Sections 6.1 – 6.4 build on the information presented above and in the National Pricing Strategy, by

providing further guidance regarding the implementation of specific economic instruments that can

be potentially be implemented by national government in order to incentivise the diversion of waste

from landfill.

6.1 Conditional grant funding for waste infrastructure

6.1.1 What is it?

As seen in Section 3, many of the barriers to diverting waste from landfill relate to the following:

Many disposal sites are not properly engineered/sanitary landfill sites (and therefore the

costs of disposal are artificially low, creating incentives for continued disposal).

High capital costs of waste infrastructure (this applies to upgrading or developing new

landfills that comply with the 2013 Norms and Standards; as well as to the development of

alternatives to landfill disposal).



A lack of funding for municipalities to invest in upgrading landfill sites, or developing the

infrastructure required to put in place alternative waste treatment technologies.

In the case of landfill sites specifically, there is a lack of funding to upgrade/improve landfill

infrastructure such that landfills comply with licence conditions and with the Norms and Standards

for Disposal of Waste to Landfill (DEA, 2013). Not only would upgrading landfill sites reduce the

environmental impacts associated with disposal of waste to landfill, it would also raise the cost of

landfilling, which would in turn create incentives for waste to be diverted from landfill.

In the case of alternatives to landfilling, funding is likewise required to develop municipal

infrastructure, such as:

Composting and/or anaerobic digestion (AD) facilities for the treatment of organic waste

Materials recovery facilities (MRFs) for the sorting and recovery of recyclable waste

Buy-back centres, particularly in formal neighbourhoods (or, mobile buy-back centres) for

the collection of recyclable materials collected by communities and informal waste pickers.

Locating buy-back centres closer to where the waste is generated will enable informal

collectors to work more efficiently and therefore recover more materials per day.

Drop-off centres for the collection of recyclable waste and organic waste streams not

typically collected by the municipality.

In addition, grants could potentially be provided not only to municipalities, but also for the

establishment of recycling businesses, thereby contributing toward the development of small

businesses.





As such, the potential need for a dedicated fund for waste management infrastructure should be

considered (World Bank, 2019a; 2019b). According to a World Bank study, “one common approach

to developing waste infrastructure is to develop a national ‘Waste Infrastructure Development

Fund’ to which municipalities can apply for capital support to improve infrastructure” (World Bank,

2019b). Examples of countries with this type of funding mechanism include India (the Jawaharlal

Nehru National Urban Renewal Mission, JNNURM) and the UK (Waste Infrastructure Fund).

However, in the case of funding for upgrading landfill infrastructure, such a fund should ideally have

conditions attached, to ensure that municipalities implement the necessary waste management

reforms in order to access such funding.

Conditional grants are grants that are provided by national government to provincial or local

government on condition that certain criteria are met; as opposed to unconditional grants, which

are provided with ‘no strings attached.’



According to the Financial and Fiscal Commission (2000), conditional grants are particularly well

suited for financing the building up of public infrastructure to an acceptable level to enable

improved service provision. In the case of conditional grants for solid waste infrastructure, in

particular landfills, conditions which could be attached to grants include the following:

o Licensing of landfill sites

o Compliance with license conditions / Norms and Standards

o Application of full cost accounting principles

o Application of cost-reflective solid waste tariffs and landfill tipping fees

o Cost recovery for waste services

o Reporting to the South African Waste Information System (SAWIS)

The intention of attaching such conditions to grants is to create incentives for municipalities to

ensure that these fundamental issues are addressed, in order to improve the state of waste

management; while also increasing the costs of landfilling to reflect best practice, ensuring that

tariffs reflect the full costs of disposal to landfill. In turn, this would create incentives to divert waste

away from landfilling, towards alternatives.

For example, according to GIZ (2015), “a national programme for subsidising/financing SWM

infrastructure can be a powerful way to incentivise local authorities to tackle cost recovery issues if

the degree of cost recovery is a criterion for financial support”. This approach has been adopted in

India, for example, under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM)

programme. This programme provides finance for local authority infrastructure, based on criteria

such as the percentage of cost recovery, and the collection efficiency of solid waste user charges. A

benchmarking system is applied, which “helps with the identification of local authority interventions

worthy of financial support” (GIZ, 2015).

6.1.2 How to implement it?

It is proposed that a dedicated fund for waste infrastructure be established, in the form of a

conditional grant allocation to municipalities. Conditional allocations from national government to

local government are provided for in Sections 214 and 227 of the Constitution (RSA, 1996).

According to Section 227, in addition to the equitable share received by municipalities to perform

their functions and provide basic services, municipalities “may receive other allocations from

national government revenue, either conditionally or unconditionally” (RSA, 1996).

Section 214 of the Constitution highlights that allocations to local government, and the conditions

on which such allocations may be made, must be provided for by an Act of Parliament. Such an Act

can only be enacted after “organised local government and the Financial and Fiscal Commission

have been consulted, and any recommendations of the Commission have been considered” (RSA,

1996). The Act must also take into account:

the national interest

any provision that must be made in respect of the national debt and other national

obligations



the needs and interests of the national government, determined by objective criteria

the need to ensure that the municipalities are able to provide basic services and perform

the functions allocated to them

the fiscal capacity and efficiency of the municipalities

developmental and other needs of municipalities

obligations of the municipalities in terms of national legislation

the desirability of stable and predictable allocations of revenue shares

the need for flexibility in responding to emergencies or other temporary needs, and other

factors based on similar objective criteria (RSA, 1996).

In the case of a dedicated fund for waste infrastructure, some specific issues and challenges that

will need to be addressed include:

The need for careful design to ensure that the parameters, accessibility requirements and

conditions of such a fund are clearly defined (World Bank, 2019b). As mentioned above,

some of the relevant conditions required to incentivise improved waste management

practises, higher landfilling costs, and, ultimately, increased diversion from landfill would

include:

o Whether or not landfill sites are licensed

o The extent to which landfill sites are in compliance with license conditions / Norms

and Standards

o The extent to which municipalities are conducting full cost accounting of waste

services

o The extent to which cost-reflective solid waste tariffs and landfill tipping fees are

being applied

o The degree to which the full costs of providing waste management services are

recovered

o The extent to which municipalities and landfill sites are reporting to SAWIS

The need to provide municipalities with technical support to develop appropriate proposals

for funding (World Bank, 2019b).

Funding for waste infrastructure should be allocated on a “cost sharing” basis to incentivise

the municipality taking ownership. In other words, municipalities should be required to

match the funding from their own budgetary allocation, to ensure that they take

responsibility and ownership of the infrastructure, and that ‘white elephants’ are avoided.

In establishing such a fund, a broader consultative process should also be followed, as per Sections

72 and 73 of the Waste Act.

Once established, conditional grant allocations to local government are published annually as

annexures to the Division of Revenue Bill for the financial year in question, and then enacted in the

Division of Revenue Act (The Presidency, 2013; Vulekamali, 2021). Specifically, a dedicated grant for

waste infrastructure would be set out in Schedule 5b, which relates to specific-purpose allocations

to municipalities, including infrastructure grants (The Presidency, 2013). The Division of Revenue



Bill specifies the value of such grants for the budget year, as well as projected values over the

medium-term expenditure framework (MTEF) period (Vulekamali, 2021).

Conditional grants are managed by the relevant national government line department, which

submits frameworks and allocations to National Treasury (Vulekamali, 2021). Consultation is also

required with a number of other key stakeholders, including other national and provincial

departments, the South African Local Government Association, NGOs, the office of the Auditor-

General, and civil society organisations (Vulekamali, 2021).

6.2 Landfill tax

6.2.1 What is it?

Landfill taxes are generally levied by national government, per tonne of waste disposed at landfill

sites. The aim is to increase the overall cost of landfilling, and thereby to discourage landfilling in

favour of alternative waste management options.

Landfill taxes are aimed at addressing the externalities associated with disposal of waste to landfill.

Externalities refer to the positive or negative side effects (external benefits or costs) of a particular

economic activity or process, which are not incurred by those undertaking the activity (e.g., the

landfill owner/operator), but are instead borne by other parties, broader society, and/or future

generations (Nahman, 2011). In the case of disposal of waste to landfill, externalities include the

environmental, social and health impacts arising from this form of disposal; such as emissions of

leachate and methane, odours, visual impacts, etc. (Nahman, 2011). Landfill taxes aim to

“internalise” these externalities, by incorporating the external costs within the cost structure of

those undertaking the activity (e.g. the landfill owner/operator); such that they can then be

incorporated within landfill tipping fees and/or waste tariffs.


In South Africa, all national taxes are imposed through the introduction of Money Bills by the

Minister of Finance in the National Assembly, as per Section 77 of the Constitution (RSA, 1996).

According to Section 77, Money Bills must be considered in accordance with the procedure under

Section 75 (Ordinary Bills not affecting provinces) (RSA, 1996).

According to DEA (2016), before considering the implementation of a landfill tax, extensive

consultation with stakeholders (including municipalities) is necessary to establish the need for and

appropriateness of such a tax. Factors to consider include:

Suitability of the tax for addressing the problem at hand. Specifically, what is the reason for

the current under-pricing of waste services in South Africa (e.g. artificially low landfilling

costs, lack of full cost accounting, lack of cost recovery, externalities, etc.); and is a landfill

tax the most appropriate means of addressing this? According to DEA (2016), if landfill costs

are artificially low, and the full costs of providing waste collection and disposal services are



not being recovered, these issues need to be addressed before considering the

implementation of a landfill tax (DEA, 2016).

The availability of alternatives, and price elasticity of demand for landfill disposal; in relation

to the purpose of the tax (reducing disposal of waste to landfill, or raising revenue).

Monitoring and enforcement capacity; specifically, the existence of weighbridges to record

the quantities of waste entering landfill sites; and to control illegal dumping (DEA, 2016;

2018b).

Socio-economic (and in particular, distributional) impacts; such as impacts on municipal

finances and on low-income households (DEA, 2016).

Each of these issues is addressed in turn below:

Suitability of a landfill tax for addressing under-pricing of waste services in South Africa:

o Before considering the implementation of a landfill tax, it is crucial to understand

whether such a tax is in fact the most suitable mechanism for addressing the

problem at hand (i.e., the under-pricing of waste services in South Africa). As

discussed in Section 6.2.1, landfill taxes are aimed at addressing a specific type of

market failure; specifically, the externalities associated with disposal of waste to

landfill.

o However, it is important to bear in mind that externalities are not the only (or even

the main) reason for under-pricing of waste services in South Africa. As seen in

Section 3.2, the under-pricing of waste services extends beyond the failure to

internalise external costs. Other reasons for the under-pricing of waste services

include:

Artificially low cost of landfilling, due to landfill sites being

deficient/unsanitary/non-engineered (i.e. landfill sites are unregulated,

unlicensed and/or non-compliant with permit conditions and/or with the

Norms and Standards)

Lack of full cost accounting

Lack of cost recovery for waste services.

o It is important to bear in mind that landfill taxes are not designed to address issues

relating to artificially low landfill costs, lack of full cost accounting, and lack of cost

recovery. These are underlying structural issues that need to be addressed before

landfill taxes could be considered. Indeed, implementing landfill taxes before these

fundamental issues are addressed could lead to further distortions.

o In addition, it should be noted that externalities represent only a small proportion

of the overall ‘gap’ between current landfill tipping fees and the full costs of disposal

to landfill:

For example, Nahman (2011) found that the externalities associated with

landfilling of solid waste in the City of Cape Town are in the order of R111

per tonne.

By contrast, the gap between current landfill tipping fees and the costs of

landfill disposal in line with the Norms and Standards is much higher. Taking

into account that many municipalities do not charge disposal fees at all, the

average disposal fee among municipalities sampled by DEA (2018b) is R92



per tonne. On the other hand, estimates of the cost of landfilling in line with

the Norms and Standards are in the range of R480 per tonne (Hanekom,

2016; Haider, 2016). As such, the failure to comply with the Norms and

Standards results in landfill tipping fees being approximately R388 per

tonne less than the cost of compliant landfilling. Even this ignores other

elements of the full cost of landfilling, such as allowances for post-closure

and rehabilitation.

It should therefore be clear that issues relating to non-compliance with the

Norms and Standards, the lack of full cost accounting, and failure to set

cost-reflective tariffs have a far bigger impact on the under-pricing of

landfill disposal, as compared to the failure to address externalities. This

reiterates the point that these prerequisites should be addressed before an

environmental tax aimed at addressing externalities (i.e. a landfill tax) can

be considered; since externalities represent only a small proportion of a far

broader problem.

Availability of alternatives, price elasticity of demand for landfill, and the purpose of the

tax (reducing disposal or raising revenue):

o Price elasticity of demand refers to the responsiveness of behaviour to changes in

price; that is, the extent to which the tax would be effective in stimulating a

reduction in waste disposed to landfill.

o In the absence of viable alternatives, price elasticity of demand for landfill is likely

to be low. In this context, a landfill tax will not be effective in reducing disposal to

landfill; it will only be effective in raising revenues.

o A landfill tax can only act as an effective price signal (i.e. it will only be effective in

diverting waste from landfill) if alternative disposal options are available (i.e. when

price elasticity of demand is high), which will allow for municipalities and private

disposers to reduce their tax burden by switching to more desirable alternatives

(DEA, 2018b).

o In the South African context, given the lack other viable alternatives, and of

enforcement capacity; the likely result is that illegal dumping (or disposal at

unregulated sites) will increase, as this is the most feasible alternative for avoiding

the tax. This will result in worse environmental outcomes as compared to disposal

at regulated landfill sites, while also reducing the potential for revenue to be

generated.

Monitoring and enforcement capacity:

o DEA have commissioned a study into the feasibility of a landfill tax as a deterrent to

divert waste away from landfill (DEA, 2018b). While the final report has not been

released, some preliminary lessons can be drawn from the Status Quo Report (DEA,

2018b) that was produced as part of the study. Specifically, DEA (2018b) finds that

South Africa does not currently have adequate systems in place (in particular,

functioning weighbridges) to adequately measure and report on the quantities of

waste entering landfill sites, which is a prerequisite for a landfill tax to be



implemented. For example, only 7% of operational landfills in South Africa have

functioning weighbridges (DEA, 2018b).

o Furthermore, DEA (2018b) finds that “an increase in the cost of landfilling as a result

of a landfill tax may lead to perverse incentives and tax avoidance. Tax avoidance

in the form of illegal dumping or increase in disposal at unregulated landfills, would

have a worse environmental outcome than before” (DEA, 2018b). Most South

African municipalities are unlikely to have capacity for the increased monitoring and

policing of illegal dumping that will likely be required as a result of the tax.

o Again, only once these prerequisites are in place, could a landfill tax be considered.

Socio-economic impacts:

o According to DEA (2018b), municipalities will be negatively impacted by a landfill

tax, as they “will have to pay a new charge that may not be recoverable from

customers, and will receive less tariff revenue if the objective of diversion of waste

is achieved” (DEA, 2018b). A landfill tax will therefore have a negative impact on

municipal finances, which are (generally speaking) already constrained. The

additional costs of a landfill tax would need to be covered either through grant

funding, or internal cross-subsidisation within the municipality (DEA, 2018b).

It is clear from the above that a number of prerequisites need to be put in place, before a landfill

tax can be considered. To summarise, these include:

Licensing of landfill sites and compliance with permit conditions and with the 2013 Norms

and Standards; to ensure that the actual costs of landfilling accurately reflect the costs

associated with best management practices, rather than deficient landfilling

Viable alternatives to landfill disposal (such as options for recycling), such that

municipalities, private disposers and waste generators can respond to the price signal in an

appropriate way, and that the tax does not stimulate an increase in illegal dumping


enable accurate monitoring and reporting of waste quantities entering landfill sites


Full cost accounting of waste services

Cost recovery for waste services, through cost reflective gate fees and waste tariffs


As such, the National Pricing Strategy (DEA, 2016) provides an Action Plan, which included a number

of fundamentals which needed to be put in place, prior to the consideration of economic

instruments such as a landfill tax. In particular, Action 1 set targets addressing the pervasive under-

pricing of waste services through full cost accounting and ensuring that municipalities charge for

waste management services to an extent that the costs are recovered; over the 2015-2018 period.

Similarly, Goal 6 of the 2011 NWMS (DEA, 2011) set a target for all municipalities to conduct full

cost accounting of waste services and set cost-reflective tariffs, by 2016. However, according to

DEFF (2021), aside from the large metros, few municipalities have achieved this.



Importantly, putting in place some of the pre-requisites listed above (e.g. fully compliant landfill

sites, functional weighbridges, improved management and enforcement, etc.) will in and of itself

increase the cost of landfilling (and thereby result in a diversion of waste from landfill); even without

the imposition of a landfill tax. Therefore, once these fundamentals have been addressed, it could

potentially be found that there is no longer a need for a landfill tax.

In addition, the externalities associated with landfilling can be mitigated to a certain extent through

improved landfill infrastructure and management. For example, fully engineered landfill sites,

constructed with liners to contain leachate, and landfill gas capture systems to prevent methane

emissions, will have a lower environmental impact as compared to landfill sites without such

systems in place. In this case, the external costs of landfilling would have been internalised in the

costs to the municipality of constructing and managing the landfill site.

In other words, there is a trade-off between the financial costs of landfilling, and the external costs.

Engineered landfill sites, which are compliant with the Norms and Standards for Disposal of Waste

to Landfill (DEA, 2013), will have higher capital and operating costs, but lower environmental costs;

whereas non-compliant landfill sites will have lower capital and operating costs, but higher

environmental costs. It is therefore clear that addressing the artificially low costs of landfilling

through compliance with the Norms and Standards will not only raise the cost of landfilling, thereby

creating incentives to divert waste toward alternatives; but will also reduce the environmental

impact associated with landfilling. Again, this might mean that there will no longer be a need for a

landfill tax.

Only once the above-mentioned prerequisites have been addressed; and only if the cost of

landfilling remains too low relative to alternatives; could a landfill tax be considered; following the

guidelines, recommendations and timelines of the Landfill Tax Feasibility Study (once available) and

the National Pricing Strategy (DEA, 2016).

Once a decision has been made that a landfill tax is required, the focus switches to the design of the

tax, including the setting of an appropriate level of the tax. The tax needs to be designed in such a

way as to “maximise positive impacts and minimise negative impacts on the economy, society and

environment; which should also involve extensive consultation with affected parties” (DEA, 2016).

According to DEA (2016), as with any tax, “it is important that due diligence and extensive

consultation be conducted in the setting of the tax level, rather than setting taxes at an arbitrary

level, which can often do more harm than good” (DEA, 2016). Specifically, the tax should be levied

per tonne of waste landfilled, at a level reflecting the external cost (taking into account

environmental, social, health and other impacts) per tonne of waste landfilled.

As mentioned above, Nahman (2011) valued the externalities associated with landfilling of solid

waste in the City of Cape Town at R111 per tonne; although this figure is not necessarily applicable

to South Africa as a whole, and would need to be updated. If a landfill tax were to be implemented,

it is suggested that a comprehensive economic valuation study be commissioned to quantify the

externalities associated with landfill disposal in South Africa, and to determine an appropriate level

for the tax. Such a study should be based on the following broad approach (DEA, 2016):



Identify the environmental, social and health impacts associated with landfilling (e.g.

methane emissions, leachate, etc.)

Quantify the impacts in physical terms (e.g. tCO2e of methane emissions per tonne of waste)

Value (quantify in monetary terms) the external costs per tonne of waste landfilled, using

an appropriate economic valuation technique (such as the Contingent Valuation Method,

the Hedonic Pricing Method, the Benefits Transfer Method, Production Function

approaches, etc.; and/or through the application of appropriate shadow prices (e.g. carbon

prices, in the cases of methane emissions).

Differentiated tax rates could also be considered, based on levels of compliance with environmental

standards. For example, sites with lower environmental standards (e.g. sites without liners or landfill

gas capture systems) should have a higher tax imposed on them, while sites with higher

environmental standards (e.g. those that comply with the Norms and Standards) could be rewarded

with lower tax rates (or be exempt from the tax altogether). Such an approach is justified from an

economic perspective; since sites with higher environmental standards will have internalized much

of the environmental externalities within their financial costs; and should therefore face lower or

zero rates of environmental taxation. This would incentivize a reduction in disposal specifically to

sites with lower standards, in favour of those with higher standards. It would also create incentives

for upgrading of landfill sites to comply with the Norms and Standards.

Thereafter, it would be necessary to conduct extensive consultation on the level of the tax; and to

conduct extensive modelling of the impacts of the tax in terms of social, economic and

environmental outcomes (taking into account price elasticity of demand for the service in question,

among other variables). In particular, attention should be paid to potential negative unintended

consequences, such as illegal dumping.

Another important consideration when designing the tax relates to what will be done with the tax

revenues. In this regard, the Waste Management Bureau, which is responsible for implementing the

“disbursement of incentives and funds derived from waste management charges” under Section

34E of the Waste Amendment Act (The Presidency, 2014), has an important role to play.

It is worth considering that, as with existing product taxes, “the use of the revenue raised through

a landfill tax is likely to be controversial” (DEA, 2018b). Ideally, the revenues should be channelled

back to the solid waste sector; for example, to finance improved waste management services,

infrastructure, or facilities; or to finance complementary policies to support alternatives to

landfilling, such as subsidies (see Section 6.3).

Indeed, DEA (2016) suggests that environmental taxes should ideally be implemented in

combination with a subsidy; as this would ensure that the instrument is ‘revenue neutral’; in that

revenues raised through the tax can be used to fund the payment of subsidies for the establishment

of alternative waste management technologies. In addition, a complementary tax-subsidy

combination would help to reinforce the appropriate behaviour (i.e. recycling); rather than simply

implementing a punitive tax without providing appropriate alternatives. In other words, activities

imposing negative externalities (e.g. landfilling) can be discouraged by means of a tax, while the



revenue collected can be used to encourage activities (such as recycling) which give rise to ‘positive

externalities’, by means of subsidies (National Treasury, 2006). Alternatively, revenues from a

landfill tax could be used to fund “specific waste management investments, general improvement

in waste management services, waste-related environmental remediation, or other applications”

(Inter-American Development Bank, 2003:30).

In principle, there are three options as to how revenues can be channelled back to the solid waste

sector; namely full ring-fencing, soft/partial earmarking, and allocations through the normal budget

process. In the South African case, ring-fencing of tax revenues is not possible. However, in the

absence of some form of earmarking, there is no guarantee that any funds will be channelled back

to the solid waste sector. A compromise may be to use ‘soft’ or ‘partial’ earmarking, whereby

“revenues will flow via the fiscus with the provision that special consideration be given to fund

certain activities, but with no fixed commitment to allocate all the revenues from a specific source

to such activities” (National Treasury, 2006:105). Alternatively, allocations can be made through

the normal budget process. However, in this case, there is no guarantee of revenues being

channelled back to the solid waste sector. In general, there are no clear guidelines to determine

whether earmarking is appropriate; instead, the desirability of earmarking needs to be assessed

case-by-case, and, where earmarking is granted, regularly re-evaluated to ensure its ongoing

desirability (National Treasury, 2006).

Finally, the proposed new tax must be introduced by the Minister of Finance as a Money Bill in the

National Assembly, as per Section 77 of the Constitution (which follows the same process as for

Section 75 Bills) (PMG, 2021). This process, which is led by National Treasury, involves:

Announcement of proposal for a new tax in the Budget

Publication of a policy paper or draft bill for stakeholder consultation, subject to Cabinet

approval (either on the day of the Budget speech, or thereafter)

Consideration of comments received

Revision of the policy or bill to address comments received

Introduction of the Bill in Parliament

Debating the Bill within the Parliamentary process, including by the Standing Committee on

Finance, the Select Committee on Finance, and the National Assembly (Hemraj, 2021).

Once the tax has been signed into law, it should be phased in gradually, according to a schedule that

is provided to the target group in advance, to ensure that the impacts of the tax can be managed

(DEA, 2016).

6.3 Subsidies, tax concessions and incentives

6.3.1 What is it?

While environmental taxes (such as landfill taxes) are aimed at addressing ‘negative’ externalities

(such as environmental impacts) by increasing the cost (and thereby reducing the demand) for

activities giving rise to such impacts; subsidies essentially act in the opposite direction: They aim to



support activities that give rise to ‘positive externalities’ (e.g. job creation and environmental

benefits); such as recycling and other alternative waste treatment technologies.

Subsidies could potentially be applied at various points along the value chain, in order to create

incentives for improved product design (using recycled materials, or designing products for

recyclability), reduced waste generation, or diversion of waste from landfill; or to support the

development of markets for recyclables, recycled materials, or products produced using recycled

materials (DEA, 2016). Similarly, as an alternative to direct, explicit subsidies, ‘implicit’ subsidies

could be provided in the form of various types of tax concessions, such as tax rebates or exemptions.

Specifically, subsidies or tax credits/rebates could potentially be paid to various actors, including:

Producers, e.g. to provide incentives to design products for recyclability; or to use recycled

materials/inputs

Households, to provide incentives to separate their waste

Collectors (either waste collection authorities, private sector companies, or informal

collectors), in order to provide incentives to collect recyclable materials

Businesses undertaking alternative waste treatment (e.g. recycling), in order to support

such activities and increase the viability of alternative waste treatment relative to landfilling

(DEA, 2018b).

Internationally, a wide range of subsidy-based instruments are used to incentivise movement up

the waste management hierarchy (DEA, 2018b). Specific examples of such instruments include:

Incentivising design for recycling / design for the environment; e.g. subsidisation of

products that are designed for recyclability, or that don’t generate non-recyclable waste

(DEA, 2018b).

Incentivising the desired waste management behaviour among waste generators; e.g.

preferential tax treatment provided to businesses for improved waste management

practices or initiatives; as in the USA and Poland (UNEP, 2005; DEA, 2018b).

Incentivising diversion of waste from landfill; e.g. through rebates on waste

collection/disposal charges for activities that divert waste from landfill, based on the

avoided costs.

Incentivising investment in recycling infrastructure; e.g. through recycling investment tax

credits, in which government gives a credit on income taxes to organisations investing in

recycling infrastructure (Walls, 2006); or through providing price support, investment

grants, accelerated depreciation, or soft loans designed to encourage private enterprises to

invest in such infrastructure (UNEP, 2005).

Supporting informal waste collectors, e.g. through mobile buy-back centres, payment for

waste pickers’ labour, compensation through subsidies (Dias and Samson, 2016), subsidised

rental of warehouses for cooperatives/small businesses (Perrupato-Stahl, 2016), etc.

Financial support of recycling activities, e.g. tax rebates for recycling (DEA, 2018b),

preferential loans for the recycling industry (DEA, 2018b), subsidies paid per unit or per kg

of material recycled, or lump-sum grants paid to communities or recycling centres (as is

common in the USA) (Walls, 2006).



Incentivising demand for secondary materials (DEA, 2018b), e.g. tax rebates or credits to

industries for using recycled materials as an input in their products (UNEP, 2005); or

providing preferential treatment in terms of public procurement practices to suppliers using

recycled content (DEA, 2016). In turn, this will create a market for recycled materials, which

will increase the viability of recycling activities.

Stabilising the market for recycled materials (i.e. providing a buffer against market price

volatility), e.g. through providing income guarantees to recycling facilities (DEA, 2016); or

providing price support (on top of market prices) to recyclers, to enable recycled materials

to compete with virgin materials even at times when market conditions are unfavourable

(e.g. when virgin material prices are low as a result of low oil prices); while still allowing

recyclers to receive sufficient income to ensure their viability.

Other forms of ‘implicit subsidisation’; e.g. municipal support of formal and informal

recyclers and composting operations through the provision of land and equipment and the

supply of material free of charge; funding of feasibility studies and research into recycling

opportunities (DEA, 2018b); funding the capital cost of MRFs; providing soft loans; etc. (DEA,

2018b).

In particular, given the specific challenges identified during this project (see Section 3), a number of

specific types of subsidies, tax concessions or similar instruments may be relevant in the South

African context in order to create incentives for the diversion of waste from landfill. These include:

Tax credits for investing in infrastructure for alternative waste treatment

Subsidies paid per unit or per kg of material processed through alternative waste treatment

‘Top-up’ incentives (e.g. paid to collectors per kg of material collected), to increase the value

of recyclables and thereby incentivise collection/recovery

Income guarantees/price support for recyclers

Tax credits/rebates for using recycled materials

Table 14 lists some of the challenges identified in Section 3; focusing specifically on those for which

there may be a role for subsidy-type instruments. It also identifies which specific type of instrument

is relevant in each case.

Depending on the specific challenge to be addressed (middle column of Table 14), different types

of subsidies could be implemented, at different points along the value chain. When considering

subsidies, it is important to identify where in the value chain they could be applied in order to have

the “largest impact on diverting waste from landfill” (DEA, 2018b).

For example, in the South African context, informal waste pickers play a significant role in the

collection of recyclables and in the diversion of waste from landfill, but are vulnerable to

fluctuations in the market value of recyclables, which means that they often ‘cherry-pick’ only the

highest value materials, and are not able to derive a sufficient income when market conditions are

unfavourable. As such, incentivising informal reclaimers, and ensuring that they are adequately

compensated for the valuable service that they provide (in terms of their contribution to the

recycling industry, and the cost savings that they generate for municipalities through airspace

savings); is of critical importance.



Table 14: Potential role of subsidies, tax concessions and related instruments in addressing

economic/financial root causes for the dominance of landfilling as a waste management option

Economic and financial issues where there

may be a role for subsidy-type instruments

Relevant type of subsidy / tax concession / incentive

High cost of

alternatives

High capital costs Tax credits for investing in alternative waste treatment

technology infrastructure

High operating costs Subsidies paid per unit or per kg of material processed

through alternative waste treatment

Lack of

benefits

from

alternatives

Market prices are too low ‘Top-up’ incentives (e.g. paid to collectors per kg of

material collected), to increase the value of recyclables

and thereby incentivise collection/recovery

Fluctuating market price of

virgin materials (linked to

global commodity prices)

Income guarantees/price support for recyclers, to

provide a buffer against market volatility

Lack of markets Tax credits/rebates for using recycled materials

For example, the concept of ‘top-up’ incentives to informal waste pickers, in the form of an

additional amount paid per kg of material collected, over-and-above the market value of the

materials, may be relevant (Godfrey, 2019). Since both industry and municipalities benefit from the

activities of informal reclaimers, such incentives could potentially be funded through EPR schemes

(specifically through EPR fees or Advance Recycling Fees), or by passing on savings in disposal costs;

or through some combination of these. The aim of such payments would be to incentivise increased

collection (across a wider range of materials, rather than only cherry-picking the highest-value

materials), to encourage pickers to sell recyclables directly to EPR-linked buy-back centres (Godfrey,

2019), and to compensate them for their activities.


Since subsidies involve allocations of public funds for a specific purpose, they would fall under the

scope of Section 77 of the Constitution (RSA, 1996; PMG, 2021), relating to Money Bills. Likewise,

tax concessions and incentives would also fall under the scope of Section 77, which includes

measures which reduce or grant exemptions from national taxes (RSA, 1996). As such, as with

landfill taxes (see Section 6.2.2); subsidies, tax concessions and incentives would need to be tabled

in the National Assembly as a Money Bill by the Minister of Finance, in accordance with the

procedure under Section 75 (Ordinary Bills not affecting provinces) (RSA, 1996).

The various types of subsidy-based instruments listed in Table 14 should be explored by the

Department of Trade, Industry and Competition (the dtic) and National Treasury, in order to

“support the development of downstream recycling and recovery markets” (DEA, 2016).

When implementing subsidies, tax concessions and incentives; a number of issues need to be

considered:

In the case of subsidies provided to private sector recyclers, “the distributional effects and

impacts on competitiveness need to be carefully assessed. Subsidies should only be



provided where a market would otherwise not exist and where access to the subsidy is not

privileged” (DEA, 2018b: 56).

Once subsidies have been implemented, there is a danger that they could become

“institutionalised”, with the recipients “claiming financial harm if the support is reduced or

stopped” (Forum for Economics and the Environment, 2002). For example, in the case of

subsidies to recycling companies; often the companies involved are not financially viable

after the subsidy is removed, and the policy therefore fails. Possible reasons include the lack

of a stable market for recyclables, or the inability of recycled materials to compete with

virgin materials (see Section 3.5). The challenge is therefore to ensure that these companies

remain sustainable, i.e., that recycling remains financially viable, even after the subsidy is

removed. This requires that:

o The system is designed in such a way that the support provided to the industry is

gradually reduced over time. In theory, as the industry grows, economies of scale

will be realised and costs will be reduced, such that the industry could ultimately

become self-sustaining. In principle, as alternative waste treatment industries

become more competitive, they could ultimately become more attractive than

landfilling, particularly if the costs of landfilling increase (e.g. if landfills are able to

achieve compliance with the Norms and Standards) (see Section 3.2).

o There is a need to ensure that distortions in the recycling market are permanently

removed, so that the market can ensure an optimal level of recycling, without

ongoing government support.

In addition, when implementing subsidy-based instruments, a key challenge relates to how such

subsidies will be funded. Generally speaking, three options are available:

1. Funding from general government revenues

2. Funding subsidies through a complementary revenue-raising instrument

3. “Self-funding” subsidies, which are funded through savings in disposal costs.

In the first approach, subsidies are funded from general government revenues, with allocations

made through the normal budgetary process. In this case, the funds used to pay subsidies could

have been raised from any source of government revenues.

Secondly, in theory, the revenues required to fund subsidies for recycling activities could potentially

be raised through a complementary revenue-raising instrument, such as a product tax, EPR fee,

advance recycling fee or landfill tax. As discussed in Section 6.2, a tax-subsidy combination can in

principle be an effective way of creating an appropriate set of mutually reinforcing incentives (i.e.,

a tax is implemented on an ‘undesirable’ behaviour, such as waste generation or disposal; while a

subsidy is provided for a ‘desirable’ behaviour, such as recycling). In addition, a tax-subsidy

combination can in principle be designed in such a way as to remain revenue-neutral, in that

revenues raised through the tax are used directly to fund the subsidy.

Indeed, according to National Pricing Strategy (DEA, 2016): “There is increasing evidence that a

coherent combination of tax and subsidy-based instruments is far more effective than

implementing any single instrument in isolation. A tax-subsidy combination has the dual benefit of

ensuring a source of funding for the payment of subsidies (and an environmentally-related avenue



for directing revenues received from the tax); and allowing for a coherent and complementary set

of incentives to be created, whereby incentives are created to both discourage environmentally

damaging behaviour (through the tax) and encourage environmentally friendly behaviour (by both

providing and subsidising a viable alternative)”.

Examples of such tax-subsidy combinations include:

Subsidies provided for the use of recycled materials in production; in combination with a

tax on virgin materials (see Section 6.4); so as to create price differentiation in the market

for inputs that favours the use of recycled materials over virgin materials (DEA, 2016).

Similarly, subsidies could be applied on the purchase of products that are made from

recycled materials or that are designed for recyclability; in combination with a tax on

products made from virgin materials or that are not designed for recyclability; so as to

create price differentiation in the product market; favouring those products that are made

from recycled materials or are designed for recyclability over those that are not.

An upstream combination tax/subsidy is a tax (paid by producers) which is levied on

produced intermediate goods, thereby providing incentives for producers to alter their

material inputs and product design; the revenues from which are then used to fund a

financing mechanism to support recycling activities; i.e., a subsidy provided to collectors,

recyclers, waste management firms or local government in order to incentivise recycling

(DEA, 2016).

Revenues generated through a landfill tax (see Section 6.2) could be used to fund subsidies

provided to waste collectors and processors per unit of waste collected or processed.

EPR fees can be used to “provide funding to cover the costs of establishing and

implementing systems for collection, sorting and other treatment required prior to the sale

of materials to recyclers; or the provision of incentives, subsidies, infrastructure and/or

information to consumers, collectors and /or processors; so as to increase the supply of

recyclables” (DEA, 2016).

Deposit-refund schemes are essentially a combination of a product tax and a subsidy for

returning used items for reuse or recycling, as discussed in Section 4.3.7.

An advance recycling fee (ARF) can be combined with a recycling subsidy. An ARF is a tax

assessed on product sales, with the explicit aim of raising revenue to cover the cost of

recycling (Walls, 2006; DEA, 2016). In this case, the revenue could be used to fund subsidies

paid per unit or per kg of material processed through alternative waste treatment (Walls,

2006). ARFs “are often assessed per unit of the product sold, but can also be assessed on a

weight basis. ARFs may be visible to the consumer when [s]he purchases a product – i.e., a

separate line item on the bill, similar to sales tax – or they can be assessed upstream on

producers and later be incorporated into the product retail price” (Walls, 2006). The level

of the ARF is determined (generally by an industry association) “based on the estimated

costs of collection, treatment, recycling, re-use and/or recovery of the product” (DEA,

2016).

Advance recycling fees (ARFs) may have a particularly important role to play in this respect. Unlike

product taxes (which are intended primarily to reduce demand for environmentally harmful



products, with revenue raising as a secondary benefit), advance recycling fees (ARFs) are “intended

primarily to raise revenues to cover recycling costs, with potential secondary benefits in terms of

reducing demand” (DEA, 2016). As with EPR fees, revenues from ARFs can be used to fund financial

incentives (payments) to consumers, collectors or processors per unit or per kg of material returned,

collected or recycled. Several studies have shown that a combination of an ARF and a recycling

subsidy is an economically efficient approach to achieving multiple policy objectives (Walls, 2006).

Specific examples of how such tax-subsidy combinations have been applied in practice are as

follows:

Estonia: Revenue from a landfill tax is “made available by Government to subsidise private

sector recycling activities. Recyclers can apply for up to 50% of their costs to establish

recycling facilities” (DEA, 2016).

Western Canada: Sales and imports of motor oil, oil containers and filters are subject to an

ARF, payable by the seller. Revenues from the ARF are “used to fund collection and recycling

programs, via the payment of a recycling subsidy to authorized collectors, transporters, and

processors for every litre of oil, every container, and every filter that is recycled or reused.

The level of both the ARF and the recycling subsidy is set by a non-profit industry

association... The value of the return incentive varies by location, in accordance with

differences in transport costs. In turn, the level of the ARF takes into account the revenues

required to support the recycling programs through the payment of the return incentives”

(DEA, 2016).

China: Producers and importers of electronic and electrical products pay a fee on each unit

produced (for domestic use) or imported. The fees are paid into an ‘electronic waste

disposal fund’. The fund is used to subsidise the collection and safe disposal of waste

electrical and electronic equipment (WEEE). Fees are paid “on a quarterly basis, via the tax

authority, or when declaring imports via the customs authority… Certified recyclers who can

provide proof of the WEEE they have recycled or disposed of are eligible to apply for a

subsidy, which is also unit-based. Fee and subsidy rates are set based on a series of

consultations with experts, producers, importers and recyclers. The rates are adjusted as

necessary as collection and disposal costs change, again based on extensive consultation.

Importantly, the fee is set at a much lower rate than the subsidy; such that the authorities

distribute and utilize the funds without surplus (i.e. no revenue is generated). The value of

the subsidy is based on the basic cost of the recycling and disposal (which in turn varies for

each of the five targeted types of WEEE), excluding collection costs; while the fee is typically

set at between 10 and 20% of the subsidy” (DEA, 2016).

However, a potential obstacle to an effective tax-subsidy combination in the South African context

is that ring-fencing of tax revenues is not possible. As such, the system would need to be designed

in such a way that guarantees that sufficient funds will be made available for the payment of

subsidies, even if this is done through soft/partial earmarking, or through the normal budgetary

process (See Section 6.2).

Alternatively, an ARF could in principle be levied by industry (e.g. as part of an EPR scheme, in which

the Producer Responsibility Organisation (PRO) would be responsible for the allocation of

revenues), rather than in the form of a tax levied by government. This may help to ensure that



revenues from the ARF are used to fund the payment of subsidies. For example, the Western Canada

used oil program referred to above is “an industry-run program in which an industry association

sets the level of the ARF and the recycling subsidy” (Walls, 2006). The role of government in such a

programme is to pass legislation mandating that that such a fee be paid, and by whom.

Finally, subsidies could be designed so as to be “self-funding”, based on the savings in disposal costs

that arise as a result of the diversion of waste from landfill. This is the approach adopted in the UK

recycling credit scheme, in which the subsidies paid to collectors and recyclers are funded through

the savings in terms of avoided disposal costs that arise as a result of the diversion of waste from

landfill, through the actions of the collectors/recyclers. In other words, savings in collection and

disposal costs as a result of increased recycling are passed on from disposal authorities to

organisations undertaking collection and sorting of recyclables (DEFRA, 2006), in order to incentivise

recycling activities. In this scheme, “credits are calculated as a percentage of the collection and

disposal avoidance costs and thus ensure some income for recycling businesses, even when the

market demand for recyclables is low” (Inter-American Development Bank, 2003). In this way, the

scheme is “not a drain on the central government budget, as it is simply a transfer payment between

different tiers of local government and third parties” (Turner et al., 1996).

Finally, as with taxes (see Section 6.2.2), the proposed new subsidy must be introduced by the

Minister of Finance as a Money Bill in the National Assembly, as per Section 77 of the Constitution

(which follows the same process as for Section 75 Bills) (PMG, 2021). This involves:

Announcement of proposal for a new subsidy in the Budget


approval






6.4 Virgin material taxes (and elimination of perverse subsidies)

6.4.1 What is it?

Generally speaking, market prices for virgin materials tend to be lower than those for recycled

materials (DEA, 2018b). This means that recycled materials are often unable to compete with virgin

materials (see Section 3.5.6), which inhibits the development of markets for recycled materials.

In principle, taxes on virgin materials would help recycled materials to compete, by increasing the

prices of virgin materials relative to recycled materials; thereby encouraging the use of recycled

materials, and the development of markets for such materials (DEA, 2018b). The aim of a tax on

virgin materials is to reduce the use of such materials as an input in the production of goods, in

favour of secondary (recycled) materials. In the context of diverting waste from landfill, the



intention of a virgin material tax is to increase the price of virgin materials relative to recycled

materials, and therefore to increase demand for recycled materials as an alternative to using virgin

materials in production. This would in turn create incentives for the collection and recovery of

recyclable materials for recycling, and thereby increase the diversion of recyclable materials from

landfill.

A common example of virgin material taxes are those applied on construction aggregates, such as

sand and gravel. A number of European countries have taxes on virgin aggregates, including the UK,

Sweden and Denmark (Söderholm, 2011).

In some cases, rather than a specific tax on virgin materials; there may be a need to first eliminate

any perverse subsidies on such materials. Subsidies on virgin materials can be seen as an implicit

‘tax’ on recycled materials; since they create perverse incentives for the use of virgin materials

rather than recycled materials. Eliminating subsidies on virgin materials would therefore contribute

towards making recycled materials more competitive, and thereby grow the market for recycled

materials.

For example, the National Recycling Coalition (1999) identified nine separate subsidies in the USA,

costing between $3 to $5 billion per year, which artificially lower the price of virgin materials (as

well as landfilling), and thereby negatively impact on recycling. It was recommended that these

subsidies be eliminated. However, it was also noted that “while the elimination of these subsidies

is an important first step, their elimination alone will not guarantee an improvement in the market

demand and prices paid for recovered materials” (National Recycling Coalition, 1999). In other

words, elimination of subsidies on virgin materials should form part of a complementary package of

instruments.


As with landfill taxes, virgin material taxes would need to be introduced by the Minister of Finance

as a Money Bill in the National Assembly (Section 77 of the Constitution), following the procedure

under Section 75 (RSA, 1996).

As with any economic instrument, the first step in considering the implementation of a virgin

material tax is to establish the need for such an instrument, in consultation with relevant

stakeholders, including relevant government departments and industries (particularly businesses

across the supply chain that would be impacted by such a tax) (DEA, 2016). A tax on virgin materials

will have impacts across the economy, not only within the solid waste sector; and as such

widespread consultation will be required. Some specific issues to consider will include, among

others:

The nature and structure of the industry in question – e.g. the degree of competition vs.

monopoly, etc.

Externalities (external costs) associated with the use of the virgin material throughout its

life cycle, which would justify the imposition of a tax. Ideally, a comparative life cycle

assessment of both the virgin material and the recycled alternative should be conducted,



to establish the extent to which the alternative material is indeed superior from an overall

environmental perspective, across the full life cycle.

Potential impacts on businesses, and on consumers (since taxes on virgin materials will in

all likelihood be passed on to consumers in the form of higher product prices). In particular,

it needs to be established whether the tax may have disproportionate impacts on smaller

businesses and/or lower income consumers (DEA, 2016).

Price elasticity of demand for the material in question, in relation to the intention of the

instrument (changing behaviour vs. raising revenue) (DEA, 2016). Since the intention of a

tax on virgin materials is to reduce the demand for such materials in favour of recycled

alternatives, a key determinant of the price elasticity of demand in this case is likely to be

the extent to which the alternative material provides similar (or superior) performance

characteristics in terms of functionality and quality, and the extent to which it meets

relevant standards.

Once the need for a virgin material tax has been established, the focus switches toward the design

of the tax, including the setting of an appropriate level of the tax. As with any tax, a tax on a virgin

material would need to be designed in such a way as to “maximise positive impacts and minimise

negative impacts on the economy, society and environment; which should also involve extensive

consultation with affected parties” (DEA, 2016).

In terms of setting the level of the tax, as with landfill taxes, “it is important that due diligence and

extensive consultation be conducted in the setting of the tax level, rather than setting taxes at an

arbitrary level, which can often do more harm than good” (DEA, 2016).

A tax on virgin materials should be levied per tonne of material purchased, at a level that reflects

the external cost per tonne. Specifically, it should “be based on the external (social, environmental

and health) costs associated with the use of the virgin material relative to the use of the secondary

(recycled) substitute; taking into account costs and benefits throughout the lifecycle of the materials

in question. In practical terms, these costs could be based on the damage costs associated with the

extraction and processing of the virgin material input (to the extent that these are not already

incorporated in prices for the virgin material, perhaps through an existing environmental levy on

extraction of the material)” (DEA, 2016). As such, as with the case of a landfill tax, a study would

need to be commissioned (unless relevant studies have already been conducted) to determine the

external (social, environmental and health) costs associated with the use of the virgin material

throughout its life cycle, relative to the recycled alternative (DEA, 2016).

As with the case of a landfill tax; extensive consultation on the level of the taxes would need to be

conducted; as well as “modelling of the impacts of the tax in terms of social, economic and

environmental outcomes (taking into account price elasticity of demand for the material in

question, among other variables)” (DEA, 2016). According to DEA (2016), differentiation of the tax

rate (based on, for example, the size of the business) should be considered; so as to minimise the

impacts on smaller businesses.



Finally, as with a landfill tax (see Section 6.2.2); the proposed new tax must be introduced by the

Minister of Finance as a Money Bill in the National Assembly, as per Section 77 of the Constitution

(PMG, 2021). This process, which is led by National Treasury, involves:

Announcement of proposal for a new tax in the Budget


approval (either on the day of the Budget speech, or thereafter)






7 Conclusions

The aim of this study was to understand the root causes for the current dominance of landfilling as

a waste management option in South Africa, and to identify relevant solutions for addressing the

issues and for increasing the diversion of waste from landfill toward alternative waste management

options; in line with the waste management hierarchy and with the concept of a circular economy.

The focus was on identifying economic instruments that can be implemented by national

government to create incentives for the diversion of waste from landfill. In this respect, a guideline

was developed for national government, providing guidance for the selection, design and

implementation of such instruments. Specifically, the focus was on economic instruments that can

be implemented by national government to create incentives for waste to be diverted from landfill

toward alternative waste management options, such as recycling and recovery.

An important finding of the study is that environmental taxes and other economic instruments are

only justified where there is a specific market failure (e.g. an environmental externality) to be

addressed. Markets and related institutions that are otherwise well-functioning, as well as the

requisite institutional capacity and political will, are important prerequisites.

Landfill taxes, for example, are not appropriate when there are underlying structural issues; e.g.

pervasive under-pricing of waste services due to landfill sites being unlicensed or non-compliant,

lack of full-cost accounting, tariffs being set below the levels required for cost-recovery, etc. These

issues need to be corrected before considering a landfill tax, which could create further distortions.

Landfill taxes are only designed to address environmental externalities, and not the various other

root causes behind the low cost of landfilling and under-pricing of waste services. Specific

prerequisites that need to be addressed before landfill taxes can be considered in South Africa are

as follows:

Licensing of landfill sites, and compliance with permit conditions and with the Norms and

Standards for Disposal of Waste to Landfill (Department of Environmental Affairs, 2013)



Viable alternatives to landfill disposal (e.g. options for recycling) to enable a change in

behaviour without stimulating an increase in illegal dumping


enable accurate monitoring and reporting of waste quantities


Full cost accounting for waste services, and cost reflective gate fees and waste tariffs, to

enable cost recovery


Importantly, putting in place some of these prerequisites will in and of itself increase the cost of

landfilling (and thereby result in a diversion of waste from landfill); even without the imposition of

a landfill tax. Therefore, once these fundamentals have been addressed, it could potentially be

found that there is no longer a need for such a tax. In this way, the potential negative impacts of a

landfill tax (e.g. stimulating an increase in illegal dumping, negative impacts on municipal finances,

etc.) can be avoided.

In addition to economic instruments that can be implemented by national government, the project

also looked more broadly at the range of actions required by all relevant role-players in order to

address the various barriers to moving up the waste hierarchy in South Africa. A wide range of root

causes for the dominance of landfilling as a waste management option in South Africa were

identified, including:

Legislative barriers



Lack of funding and other resources


Behavioural and institutional issues

A broad range of potential solutions were identified for addressing the various issues and increasing

the diversion of waste from landfill toward alternative waste management options. Given the

complex nature of the problem, and the broad range of issues to be addressed, no single type of

intervention on its own is likely to be effective; nor will actions by any one role-player be effective

in isolation. Instead, implementing the waste hierarchy and transitioning to a circular economy will

require a coherent set of mutually reinforcing regulatory, economic and other interventions; with

actions required by all relevant role-players.

In particular, in addition to the ‘downstream’ measures for diverting waste from landfill that were

the focus of this particular study; there is also a need to focus on waste avoidance and reduction, in

line with the waste hierarchy; rather than solely relying on ‘end-of-pipe’ solutions to deal with the

waste problem.

Specifically, there is a need to focus on improved product design (e.g. Design for Recycling (DfR), or

Design for Environment (DfE) more broadly); in line with the circular economy. In particular, with



the current focus on EPR addressing the paper and packaging, electrical and electronic equipment

and lighting sectors; there is a need for actions to address organic and Construction and Demolition

(C&D) waste; which make up the bulk of the waste going to landfill, and for which significant

untapped opportunities exist. In the absence of liners to control leachate, and landfill gas capture

systems, organic waste in particular is problematic in terms of its environmental impacts.

Future research should therefore to focus on:

Appropriate measures for ensuring waste avoidance and reduction, without generating

undue negative socio-economic impacts

Measures to incentivise improved product design (DfR / DfE) and the transition to a circular

economy

Measures to incentivise the diversion of organic and C&D waste from landfill, and the

beneficiation of these waste streams.

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Council for Scientific and Industrial Research (CSIR)

Waste RDI Roadmap Implementation Unit

Meiring Naudé Road, Brummeria,

Pretoria, South Africa

Postal Address

PO Box 395, Pretoria, South Africa, 0001

Tel: +27 (0)12 841 4801

Fax: +27 (0)12 842 7687

Email: [email protected]

www.wasteroadmap.co.za

Department of Science and Technology

Directorate: Environmental Services and Technologies

Meiring Naudé Road, Brummeria,

Pretoria, South Africa

Postal Address

Private Bag X894, Pretoria, South Africa, 0001

Tel: +27 (0)12 843 6300

www.dst.gov.za

Documents

Incentives for Municipalities to Divert Waste